An International Guide to
Patent Case Management for Judges

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9.7.2 Financial relief – damages and account of profits

The quantum phase of patent litigation is the proceeding in which the amount (i.e., the quantum) of financial relief is determined. This may be damages or, at the claimant’s election, an account of profits. This phase is usually bifurcated from and occurs after the liability phase.

Thus, if a patent is held valid and infringed, separate proceedings will need to be commenced to determine the amount of compensation payable to the patentee. Having contested liability for several years and often in many other jurisdictions besides England and Wales, the parties frequently become financially and emotionally exhausted by the litigation and the patentee may, having secured injunctive relief as appropriate, be reasonably content with its position. It is for these reasons that parties often settle their differences before the quantum proceedings are commenced or at least in the early stages of such proceedings. Consequently, this is why judicial decisions and judgments on the quantum of damages payable following patent infringement are comparatively rare.

While damages are usually compensatory in nature, pursuant to Article 13 of the Intellectual Property Enforcement Directive147 as implemented into U.K. law by Article 3 of the Intellectual Property (Enforcement, etc.) Regulations 2006,148 it is possible that some form of enhanced level of damages could be ordered.

The patentee is entitled to elect whether it seeks financial compensation by way of damages or an account of profits but not both. Before election, a patentee is entitled to a limited amount of disclosure from the infringing party pursuant to the principles laid down in Island Records Ltd v. Tring International plc.149 It is more common for the patentee to opt for an assessment of damages, although commercial considerations may push the patentee toward an account of profits.

When calculating damages, the court will consider whether the patentee manufactures goods in accordance with the patent, grants licenses to exploit the invention or both. If the patentee grants licenses, then it will be entitled to receive damages as if the infringer had a license on the usual terms and conditions required by the patentee. If the patentee manufactures in accordance with the patent, then, although the principle remains the same – to put the patentee in the position it would have been in but for the infringement – the analysis is often more complicated. The court must assess numerous factors, such as the extent to which the patentee’s and the infringer’s goods compete with one another, the extent to which the presence of the infringer caused price depression in the market and the extent to which sales of the patented product would have resulted in sales of other goods by the patentee as well. If a patentee neither manufactures goods in accordance with its patent nor grants licenses, the court will usually assess the compensation payable to a patentee on the basis of a reasonable royalty.

The approach that the court will take to the assessment of compensation if the patentee opts for an account of profits is different. An account of profits is restitutionary in nature, designed to deprive the infringer of the unlawful profits it made by virtue of the infringement of the patent and to hand those profits over to the patentee. If the patented product or process forms only part of the product – as will almost inevitably be the case with a composite article such as a mobile phone or a car – then the court will be required to make an apportionment of the value attributable to the patented component.