Intellectual Property Law Update – Damages for infringement of a patent that is still under attack

Intellectual Property
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Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd [2022] FCA 445

Interlocutory application for stay of proceedings relating to quantification for patent infringement – Applicants had succeeded in infringement proceedings and appeal rights exhausted – patent subsequently challenged by another party – submission that if subsequent challenged succeeded, respondents will have defence to claim for damages or account of profits – application dismissed.

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The Applicant (AMC) brought 2016 proceedings against Globaltech (the 2016 Proceeding), in which the Court concluded that Globaltech had infringed its patent (the Patent), and Globaltech’s challenge to the validity of the patent failed. The Court made final orders. Globaltech’s appeal was dismissed, as was its subsequent special leave application. AMC’s claim for damages or an account of profits in that proceeding remained to be determined.

In 2019, AMC brought fresh proceedings against Globaltech and others (the 2019 Proceeding) in relation to whether a different product infringed the Patent. One of the other respondents (Boart) brought a cross-claim alleging invalidity, on the basis that the Patent was not entitled to its priority date and therefore was anticipated by AMC’s own product (Boart cross-claim). AMC and Globaltech agreed that Globaltech could rely on any finding of invalidity in relation to the Boart cross-claim in the 2019 Proceeding.

Globaltech applied to stay the quantum hearing arising out of the 2016 Proceeding because it submitted there was a reasonable argument that the Boart cross-claim would succeed and that the Court would hold that the relevant claims were invalid. Globaltech noted that in the 2019 Proceeding, AMC had agreed that Globaltech was entitled to rely on any finding of invalidity in the Boart cross-claim. Globaltech submitted that if the claims in the Patent were declared to be invalid in the 2019 Proceeding, Globaltech would have a defence to AMC’s claims for damages or an account of profits in the 2016 Proceeding, because the Patent would be, and would always have been, invalid. In relation to this submission, Globaltech relied on Lord Sumption’s comments in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46 (Virgin Atlantic) at [32] and [36] (Lady Hale, Lord Clarke and Lord Carwath agreeing).

Justice Besanko observed that, although it seemed to him that the cross-claim was not hopeless, it was not irrelevant that it was not pursued in the 2016 Proceeding. He concluded that, although Globaltech may have a defence in the 2016 Proceeding, and there may be difficulties in Globaltech recovering any amounts it is entitled to recover if there was a judgment and payment in the 2016 Proceeding:

  • AMC had a substantial claim for damages or an account of profits in the 2016 Proceeding and it had had to wait for a considerable time for pecuniary relief;
  • Globaltech had made not offer of security;
  • there was at least a question as to Globaltech’s ability to meet a substantial judgment sum;
  • Globaltech had delayed more than a year in bringing an application for stay after Boart brought its cross-claim;
  • substantial steps had already been taken with a view to a hearing on damages or an account of profits;
  • the taking of further steps may indicate that the dispute is narrow; and
  • there may be a substantial dispute as to whether the principles enunciated in Virgin Atlantic apply in Australia, given the difference between the statutory regime in Australia and the United Kingdom.

Justice Besanko held that the balance of relevant factors did not favour a stay, given that AMC had a judgment in the 2016 Proceeding, in relation to which all appeal rights had been exhausted, and which it was entitled to enforce. He therefore refused to order a stay.

Justice Besanko concluded that costs should be in the cause, because AMC’s position on Globaltech’s stay application had not been clear.

The decision indicates that, where there are multiple sets of proceedings concerning a single patent, and a party who is found to infringe in earlier proceedings considers that validity issues raised in later proceedings may provide a defence to damages or an account of profits, the infringer should raise the question as promptly as possible, or risk being refused a stay on the inquiry as to damages, and, possibly, risk being shut out of relying on the defence altogether.

The decision also raises questions as to whether the position in the UK as expressed in Virgin Atlantic (that once a patent has been found to be invalid, a party is not liable for infringement of that patent, at least unless there is a judgment for a liquidated sum by way of damages, even if that party has earlier been found to infringe) applies in Australia. It will be interesting to see whether this issue is agitated again, either by Globaltech in this case once the 2019 Proceeding is handed down, or by other parties in the same position.

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