When a patent is infringed, an Australian court may decide to award additional damages in favour of a patentee having regard to the flagrancy of the infringement. This was the case in Gram Engineering Pty Ltd v Oxworks Pty Ltd1. However, the award for additional damages was set aside on appeal by the Full Federal Court in Oxworks Trading Pty Ltd v Gram Engineering Pty Ltd [2019] FCAFC 2402 upon application of the Court’s discretion.
Statutory framework
Section 122(1A) of the Patents Act (1990) Cth (the Act) stipulates the following with regard to relief for infringement of a patent:
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:
- the flagrancy of the infringement; and
- the need to deter similar infringements of patents; and
- the conduct of the party that infringed the patent that occurred:
- after the act constituting the infringement; or
- after that party was informed that it had allegedly infringed the patent; and
- any benefit shown to have accrued to that party because of the infringement; and
- all other relevant matters.
It is evident from s 122(1A) above, that a court must consider each item when determining if additional damages are an appropriate remedy. It is also worth noting that the use of the term “may” in s 122(1A) provides the court with discretionary power when considering a claim for additional damages.
Background and Primary Decision
Gram Engineering Pty Ltd (Gram) commenced proceedings against Oxworks Pty Ltd (Oxworks) in which it alleged, amongst other things, that Oxworks infringed Gram’s Australian Patent No. 2004291566 (the Patent) entitled “Fence plinth”. A plinth, in this context, is an element of a fence and used at the base of a fence construction. Relevant figures from the Patent are shown below, the plinth being numbered 28.
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Claim 1 of the Patent recites:
>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.
Oxworks contended that their competing fence plinth did not infringe the Patent because it was extruded through a die, rather than being “formed from sheet material” as required by claim 1. However, the primary judge decided that the word “sheet” did not require that the material be flat and could have corrugations or profiles.
The primary judge also decided that Gram was entitled to additional damages. The primary judge took into account various facts in considering s 122(1A), including:
- Oxworks was provided with advertising material relating to the plinth on two occasions.
- Oxworks received a cease and desist letter referring to the Patent, yet continued to sell the infringing plinth even after that letter.
- There was indeed “copying” even though the plinth made by Oxworks had different dimensions. The shape of the plinth was almost identical.
- There was no dispute about the validity of the Patent and there was no subsisting cross-claim for revocation.
Summary of Appeal Decision
The Full Court agreed with the primary judge’s conclusion regarding the construction of the claims and maintained the primary judge’s earlier finding that Oxworks had infringed Gram’s patent.
In considering the ground in relation to the claim for additional damages, the Full Court explained that certain actions may not necessarily be considered flagrant. For example, the Full Court noted that “it is not illegitimate, or flagrant, for a competitor to examine the disclosure of a patent and to attempt to work around the monopoly claimed in the claims”3.Furthermore, the Full Court stated that:
“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.” 4
The Full Court concluded that a reasonably arguable defence to infringement based on the construction of the claims, despite being ultimately incorrect as was relevant in this case, was a relevant consideration to the exercise of the discretion as to whether or not to award additional damages:
“… the primary judge erred in this case by failing to attend to an important aspect of the argument advanced on behalf of Oxworks, namely that Oxworks had a reasonably arguable defence to the allegation of infringement based on its construction of the claims of the patent. Had he done so, he ought to have concluded in accordance with the authorities to which we refer below that the decision of Oxworks to continue to pursue its own commercial interests in the face of allegations of infringement that could objectively be considered to be reasonably defensible is a strong factor telling against the award of additional damages.” 5
In reaching this conclusion, the Full Court reviewed evidence concerning an email from Mr Hoskins, CEO of Oxworks, to Gram in relation to allegations of patent infringement when applying the Court’s discretion:
“In the present case it is apparent from the content of Mr Hosking’s email of 29 May 2017 that, as at that date, a non-infringement argument addressing the “formed from sheet material” integer of claim 1 was contemplated. As may be apparent from the reasons set out in addressing grounds 1 and 2 of the present appeal, whilst that argument has been resolved in favour of Gram, we are satisfied that the non-infringement contention based on this integer was reasonably arguable. In this instance this weighs heavily against an award of additional damages. It diminishes the force of the submission that the act of copying was flagrant, because it provides a legal basis for Oxworks to pursue that conduct, and it provides an explanation for the decision on the part of Oxworks to continue making and selling the Oxworks plinth after the cease and desist letter. While giving great deference to the discretionary nature of the decision, when the reasonableness of the arguments against infringement are taken into account, we do not think that the circumstances warrant the award of additional damages under s 122(1A) of the Patents Act. Accordingly, the first basis upon which this ground of appeal is advanced is accepted.” 6
Discussion
The Full Court’s decision reminds us that additional damages should be applied where intentional infringement has occurred, and where the infringer continues to deliberately infringe, notwithstanding advice to the contrary. The Full Court has approved the view that even if an alleged infringer fails to defend its reasonably arguable view regarding non-infringement, and continues to produce infringing products, entitlement to additional damages under section 122(1A) of the Act may not necessarily be triggered.
Even though the courts have the authority to award additional damages which is encouraging to patentees, this decision highlights that the application of section 122(1A) of the Act is a balancing exercise and a range of factors need to be accounted for to determine if the infringer’s actions are in fact flagrant.
1 Gram Engineering Pty Ltd v Oxworks Pty Ltd [2019] FCA 689
2 Oxworks Trading Pty Ltd v Gram Engineering Pty Ltd [2019] FCAFC 240