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From when must a threat be compensated?

By Johanna Gibson, David Pearce, Jeremy Phillips and Ilanah Simon.

A threat to bring a patent infringement action is highly likely to influence the commercial conduct of the person threatened, which is why the law of some countries, including the UK, provides that the making of a groundless threat to sue is, within certain carefully prescribed limits, an actionable wrong in itself.

Right: an angry Smurf, not to be confused with a threatening Smurfit

An interesting recent threats decision is LB Europe Ltd (trading as DuPont Liquid Packaging Systems) and another v Smurfit Bag In A Box SA and another, a Patents Court (England and Wales) decision of Roger Wyand QC, sitting more than a week ago as a deputy judge of the High Court [noted by LexisNexis Butterworths' subscription-only service].

In short, following a vigorously-litigated fall-out between LB and patentee Smurfit over 'bag-in-a-box' drinks containers, it was finally established that Smurfit's patent was valid but that LB had not infringed it. Since LB had pursued Smurfit for making groundless threats to sue for patent infringement, the question arose as to how much LB could recover by way of damages. An inquiry as to damages was ordered, in which the question arose as to the date from which, in the absence of the threats, LB would have been able to fulfil orders to supply its own two lines of non-infringing products to its customer (incidentally, the second claimant) for use in the latter's product lines. Since the initial threat of infringement proceedings was made against the second claimant in June 2005, it could be argued that this was the time from which damages caused by the threat should be assessed. Smurfit however argued that, since LB's own product had not yet been developed into a commercially viable product by then, it would be wrong to award damages from the date of the initial threat. Roger Wyand QC held that, on the evidence, if no unjustified threats had been made by Smurfit, LB's two product lines would have been in use in January and June 2006 respectively.

This seems perfectly sensible to the IPKat: since patent threats damages are just like any other civil damages, their assessment must take into account the loss actually suffered by the wrongful deed. Merpel says, it seems that while the IP Enforcement Directive requires EU Member States to provide for damages that are not merely compensatory but which take into account the prejudice suffered by the claimant, the old principles for assessment of damages are gone -- but this seems to apply only to damage caused to the IP owner, not damage caused by the IP owner.

Smurfits here and here
Smurfs here and here

Full post as published by IPKat on June 14, 2008 (boomark / email).