2.7 Civil remedies
Section 122 of the Patents Act 1990 (Cth) provides for the relief available to a patentee where a claim of an asserted patent is found by a court to be infringed. Such relief includes:
- an injunction (subject to such terms, if any, as the court thinks fit);
- either damages or an account of profits (at the election of the patentee); and
- an additional amount in an assessment of damages if the court considers it appropriate to include such an amount (commonly referred to as “additional damages”).
Each form of remedy is discussed in turn below.
2.7.1 Injunctive relief
In addition to pecuniary remedies (outlined in the next section), permanent injunctive relief is also available.110 In the ordinary course, a successful patentee will be granted a permanent injunction for the life of a patent.
However, injunctive relief is subject to equitable and discretionary considerations and, therefore, may not be an appropriate remedy in all cases. For example, the appropriateness of a permanent injunction has been queried by the Federal Court of Australia in respect of infringement of a patent claiming a new method of a medical treatment using a therapeutic agent that is also widely used for other non-infringing medical treatments.111
Further, the form of the injunctive relief will depend on the specific circumstances of each case. A court can grant a permanent injunction prohibiting infringement in “general form” (i.e., restraining the infringer from infringing a particular patent or patents) or an injunction in terms limited to the specific infringements established at trial, known as a “conduct-based injunction” (where an infringer is restrained from doing those certain acts).112
2.7.2 Separation of quantum and liability
It is common in patent infringement proceedings for liability to be heard and determined before considering the quantum of pecuniary relief. This is because parties often agree, and the court considers it appropriate, for questions of liability (i.e., infringement and validity issues) to be heard and determined as a separate and preliminary question prior to any hearing on quantum of pecuniary relief.113
Due to this bifurcation of liability and quantum, and as a matter of commercial practicalities and convenience, issues relating to pecuniary relief are often resolved inter partes after the liability judgment has been given and any appeals have been determined, and before the hearing on pecuniary relief.
A patentee must elect pecuniary relief in the way of either damages or an account of profits: a patentee cannot choose both damages and an account of profits. Discovery can also be sought and obtained following a finding of patent infringement to assist the patentee in making the election. An infringer can also be ordered to provide an affidavit or audited accounts with respect to its infringing sales or profits.
2.7.2.1 Damages
Damages is a common law remedy, and damages for patent infringement are awarded according to the ordinary principles relevant to tort law. The rationale for an award of damages in patent infringement is to restore the patentee as much as reasonably possible to the position as if the infringement had not occurred. Damages should be assessed liberally and to the best possible approximation. However, a patentee must first demonstrate the requisite threshold elements of causation and reasonable foreseeability in accordance with common law.
The Federal Court of Australia has recognized that there are a number of different ways to calculate damages for patent infringement, including on a “lost sales” basis, using a “reasonable license fee,” or a “user principle” basis, depending on the facts of the particular case. Further, provided foreseeability and causation are demonstrated, damages for patent infringement can also be claimed for the loss of goods that commonly would have been sold with the patented goods, springboarding or on other grounds.
Damages may also attract interest under Section 51A of the Federal Court of Australia Act 1976 (Cth).
2.7.2.1.1 Lost sales
The “lost sales” methodology is often used where the patentee has exploited the patent by manufacturing, production or direct sales, and the infringer is a competitor in the relevant market. However, the onus is on the patentee to show that the relevant sales are actually “lost.” This can be problematic for certain patentees: often, the sale of an infringing item does not (without more) equate to one unit of a lost sale for the patentee. Relatedly, the patentee may also need to prove that the patentee could have satisfied the additional demand and would have made a profit on that sale.
2.7.2.1.2 Reasonable license fee
Conversely, a “reasonable license fee” approach is generally employed by a patentee who exploits a patent through licensing to others. In implementing this methodology, the appropriate measure of damages is considered to be the determination of a license fee, either as would have been agreed to by the patentee or on a notional basis. Again, the onus is on the patentee to demonstrate the amount of a reasonable license fee.
2.7.2.1.3 “User principle” basis
The “user principle” basis of damages is where a successful patentee can recover a reasonable sum of damages from an infringer who has wrongfully “used” the patentee’s property, even, for example, where the evidence is that the patentee would not have granted a license at all, or if it cannot be shown that the patentee has suffered an actual loss. Using the “user principle” methodology, the quantum of damages is often determined by assessing the amount the infringer would have had to pay for the “use” of the patent, for example, by way of a notional license fee.
2.7.2.2 Account of profits
An account of profits requires an infringer to account for and disgorge the profits it made through the infringing conduct. As an account of profits is an equitable remedy, equitable considerations apply, including knowledge of wrongful conduct on the part of the infringer and equitable defenses such as estoppel, laches, acquiescence and delay.
An account of profits is generally calculated by taking the revenue made by the infringer and subtracting any reasonable costs expended that are attributable to the infringing sales, such as costs in respect of manufacturing, marketing and distribution.
Further, if the patent in issue is for a product that is a single component within a larger product (e.g., a SIM card inside a smartphone), a court may require an apportionment of the profits to take into account there being a large proportion of non-infringing parts within the relevant article. This analysis will also depend on whether the infringing part is considered an “essential part” of the article.
2.7.2.3 Additional damages
Where a patentee has elected to seek damages for patent infringement, the court also has the discretion to include an “additional amount in the assessment of damages” if it considers it appropriate to do so.114 Importantly, there is no requirement for any proportionality or relationship between the amount of actual damages awarded and the quantum of any “additional damages.” Relatedly, there is no limit to the quantum of additional damages prescribed by the Patents Act or accompanying regulations. Discovery can also be ordered if considered by the court to be relevant to the additional damages claim.
Section 122(1A) of the Act relevantly sets out the factors that a court can “have regard to” if the court “considers it appropriate to do so.” Importantly, these factors are nonlimiting and include:
- (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 last criterion – namely, “all other relevant matters” – has been construed to allow parties to seek to rely on a variety of conduct in seeking an award for additional damages.115
Additionally, more than mere “copying” is required to enliven the application of Section 122(1A), as the purpose of the additional damages regime is to award such damages in cases of wilful infringement of a patent. For example, it is considered not to be a “flagrant” or illegitimate act for a potential competitor to attempt to “work around” a particular patent.
Further, the Federal Court of Australia has found that the fact that an infringer possessed a reasonably arguable belief that the relevant patent was invalid or not infringed is an important factor tending against an award of additional damages. This is so, even if those non-infringement or invalidity defenses are ultimately unsuccessful at trial.116
2.7.3 Other remedies
There are number of other remedies available to patent litigants in Australia, including Mareva injunctions, Anton Piller orders and orders for ancillary final relief (such as the destruction or delivery up of infringing articles).
In broad terms, an Australian court may order a Mareva injunction (also known as a “freezing” or “asset protection” order) if it is satisfied that:
- judgment has been given in favor of the applicant, or the applicant has a “good arguable case on an accrued or prospective cause of action”; and
- there is a danger that the judgment or prospective judgment will be wholly or partially unsatisfied because the judgment debtor or prospective judgment debtor has either absconded or removed, disposed of or diminished the value of their assets.117
Freezing orders are exceptional in nature, and the applicant for such an order will need to provide the usual undertaking as to damages, being to submit to any order as the court may consider just for the payment of compensation to any person (whether or not that person is a party) affected by the operation of the order. Further guidance on freezing orders, including a sample form of a freezing order, appears in the Federal Court of Australia’s Freezing Orders Practice Note (GPN-FRZG).118
In Australia, an Anton Piller order (also called a “search” order) may be made if the court is satisfied that (i) the applicant has a “strong prima facie” case and will suffer “serious” loss or damage if the search order is not made, and (ii) there is “sufficient evidence” that the respondent possesses important evidentiary material and that there is a real possibility that such material might be destroyed or otherwise unavailable for use in evidence in the proceeding or anticipated proceeding.119 Applications for search orders are generally made on an ex parte basis, require the usual undertaking as to damages and involve the court appointing an independent solicitor to supervise the execution of the search order. Further guidance on search orders, including a sample form of a search order, appears in the Federal Court’s Search Orders Practice Note (GPN-SRCH).120
In addition to injunctive relief, it is common for patentees following a successful patent infringement action to request orders for the delivery up or destruction of infringing articles. Whether such ancillary relief should be awarded is ultimately a discretionary question for the court. Among other things, it needs to be shown that the infringing articles that are the subject of the delivery up or destruction order do, in fact, fall within the scope of the claims and that the orders are required (over and above any order for injunctive relief) as additional protection against the risk of future infringement.121
It is also not uncommon for successful patentees in Australia to seek declarations of infringement and, if the validity of a patent claim has been questioned and its validity upheld, an order for a certificate of validity under Section 19 of the Patents Act 1990 (Cth). The effect of a certificate under Section 19 is that, if a subsequent revocation proceeding is issued in respect of the claim that is the subject of the certificate, and the patentee is successful in that subsequent proceeding, then the patentee may be entitled to costs on a solicitor and client basis in that subsequent proceeding.122
2.7.4 Costs
2.7.4.1 General approach to costs
In all courts in Australia, including the Federal Court of Australia, costs are at the discretion of the court. That is, the court may make an order that one party pay the other party’s legal costs for the proceedings. Legal costs will include the costs of legal representation, including any disbursements such as barristers’ fees and expert costs.
Where a costs order is made, the usual rule is that “costs follow the event,” meaning that the unsuccessful party will pay the legal costs of the successful party. The total costs ordered against the unsuccessful party are typically payable on a “party and party” basis.123 Party/party costs are costs that have been fairly and reasonably incurred by the party in the conduct of the litigation. But, as the order is at the court’s discretion, on application by a party, the court may order that costs be paid on a different basis, including on an indemnity basis.124 Indemnity costs allow for the recovery of all of a party’s costs except those that have been unreasonably incurred. Under any costs order, a party does not have to pay any costs that have been improperly, unreasonably or negligently incurred.125
In most cases, it is not possible for a successful party, even on an indemnity basis, to recover all of their costs. For example, a party awarded costs on a party and party basis may only be entitled to recover approximately 60 percent of these costs once their costs are assessed on a fair and reasonable basis. One reason for this gap between actual costs and what is assessed to be fair and reasonable (on a party and party basis) is that the actual cost of counsel and experts and other legal costs is higher than is allowed for under the court scale.
If a party is only partially successful – or for other reasons – a judge may make no order as to costs, order the unsuccessful party to pay less than 100 percent of the successful party’s costs on a party and party basis, or make an order that the successful party pay the unsuccessful party’s costs in full or in part. This may occur where one party has not complied with the overarching purpose set out in Sections 37M and 37N of the Federal Court Act 1976 (Cth) – facilitating the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible – or has otherwise acted in a way that has wasted costs. It has also become commonplace in patent cases for courts to adopt an issues-based approach to the award of costs – for example, by only requiring an unsuccessful patentee in a revocation action to pay a portion of the successful revoker’s costs on the basis that the revoker was successful on some but not other grounds.
Particular reference should be made to Part 40 of the Federal Court Rules 2011 (Cth) concerning costs and the Costs Practice Note (GPN-COSTS)126 in respect of costs in the Federal Court. If the matter is listed in a state court, the equivalent practice notes, rules and legislation applicable in that jurisdiction should be consulted.
The above applies both to first-instance hearings and on appeal. In either case, costs are ordinarily sought by the applicant in the originating application commencing proceedings. Parties are usually heard on the question of costs by the court by way of either or both oral and written submissions at the end of the trial, once reasons for judgment are delivered or when orders are made in relation to the substantive issues in the proceedings.
2.7.4.2 Interlocutory proceedings and other issues
Parties may apply for costs orders in interlocutory applications. Where a party has been wholly successful in an interlocutory application, they may obtain an order that the other party pay their costs of the application, to be determined similarly to the above.
Where there have been wasted costs, the affected party may seek an order for “costs thrown away.” An order of this kind means that, whatever the outcome of the proceedings, a party will be entitled to recovery of those costs. For example, where an applicant has amended its pleadings, resulting in the removal of a cause of action that the respondent has already spent time and money responding to, the respondent may apply for an order for costs thrown away.
If an applicant or cross-claimant discontinues proceedings,127 an adverse costs order, usually on an indemnity basis, is ordinarily made.128
2.7.4.3 Security for costs
Where a respondent has reason to believe that an applicant may not be able to cover an adverse cost order if its claim is unsuccessful, it may apply for security for costs orders.129 Upon an interlocutory application seeking security for costs being filed in an existing proceeding, a court will consider the applicant’s ability to meet an adverse costs order. This includes whether there is reason to believe that the applicant will be unable to pay the respondent’s costs if ordered to do so, whether the applicant ordinarily resides outside Australia, is suing for someone else’s benefit, is impecunious or any other relevant matter. These matters should be dealt with by affidavit evidence.
A party may seek further orders that proceedings be stayed until any security ordered has been paid into court. Once paid, the security is held by the court until the conclusion of the proceedings. If security is not paid as ordered, a respondent may apply for the proceedings to be dismissed.130
2.7.4.4 Offers of compromise and Calderbank offers
The costs a party is liable to pay may also be affected by the existence of a valid offer of compromise made under the Federal Court Rules131 or of a Calderbank offer.132 In both cases, form requirements must be met for the offers to be accepted by the court as within these categories. If accepted, and depending on the offer made and the outcome of the case, one or the other party may be entitled to have their costs paid on an indemnity basis from the date of the offer or as otherwise provided for by the Federal Court Rules.
Such offers are frequently made throughout proceedings to protect a party’s costs position with the aim of efficiently settling proceedings to avoid incurring unnecessary costs. The court should not be informed of any settlement offers before the substantive issues in the proceedings have been determined.
2.7.4.5 Assessment of costs
Where a court makes an order for payment of a party’s costs, and failing agreement by the parties as to the quantum to be paid, the costs must be taxed in accordance with the Federal Court Rules (e.g., on a party and party basis or an indemnity basis). As part of this process, a costs assessor will be engaged to assess the costs payable to the party in whose benefit the order was made.133 This is known as the taxation process. A costs assessor is an independent specialist knowledgeable about the costs rules and industry costs.
Once the costs assessor has assessed the costs, a report is provided to the court, and, if there is no dispute, orders will be made that the liable party pay the assessed amount. If the parties are unable to agree on the assessment of costs, there may be a hearing to determine the costs payable. However, courts seek to avoid hearings on costs, which are lengthy and expensive. Party cooperation in respect of costs is therefore expected in order to avoid a contested costs hearing.
Compromises such as an agreed lump sum payment for costs are another way to streamline the costs process, orders for which the court may make upon application by the parties.134