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MALAYSIA: HOW PATENT DAMAGES ARE ACCESSED BY COURT

29th May, 2019

In the case of Asia File Products Sdn Bhd (herein referred as “Plaintiff”) V Brilliant Achievement Sdn Bhd, Lion File Marketing Sdn and Kho Kok Seang (herein referred as “1st, 2nd and 3rd Defendant respectively”) at the Court of Appeal against the Senior Assistant Registrar’s (hereinafter referred to as “the SAR”) assessment of compensatory damages for patent infringement (hereinafter referred to as “the Assessment”).

The Plaintiff owns Malaysian Patent No. MY-137755-A (hereinafter referred to as “the Patent”) regarding a “box file” to keep documents. The box file can be installed without any tools and has a clip/clamp which holds filed documents.

The 1st Defendant manufactures stationery products, including box files which were being marketed, distributed and sold by the 2nd Defendant. The Assessment however did not concern the 3rd Defendant – who is the director of the 1st and 2nd Defendants. It is noted that the 1st Defendant has four different types of box files.

An Original Action was filed by the Plaintiff, claiming that among others, sales of the four types of box files by all the Defendants had infringed the Patent. A counterclaim was filed by the 1st Defendant to invalidate the Patent. However, the counterclaim was dismissed by the Court and the Original Action was allowed as the Court held that the 1st and 2nd Defendants were indeed infringing the Patent. The Plaintiff then elected the Court to assess compensatory damages to be paid by the 1st and 2nd Defendants to the Plaintiff for the infringement of the Patent.

The 1st Defendant then had filed for an application to the Court to amend the earlier decision and held that Types 2, 3 and 4 of the 1st Defendant box files had infringed the Patent. No appeal was filed by the Plaintiff regarding this decision. As the Plaintiff did not file an application for directions regarding the Assessment within the one-month time period from the date of High Court’s decision, the Plaintiff applied to the Deputy Registrar (hereinafter referred to as “the DR”) for an extension of time for directions regarding the Assessment. It was however rejected by the DR.

The Plaintiff then filed an appeal at the High Court against the DR’s Decision. The High Court in hearing the appeal set aside the DR’s Decision and the Assessment was therefore reinstated and the Assessment should have been conducted by the SAR (not by the learned DR who had set aside the Assessment).

During the appeal proceeding, there were several issued discussed in assessing patent damages. They include:

  • Can a patent owner rely on witness statements (hereinafter referred to as “the WS”) produced at the trial by merely producing an affidavit affirmed by a person (other than the witnesses who gave the WS)?
  • Can Royalty Basis be applied in this Assessment? What about Lost Profit Basis?
  • Is Plaintiff entitled to loss of profit for all infringing products?

Based on issue (i), the Court held that the SAR had committed an error in allowing two WS and by giving weight to them in the Assessment as the two witnesses did not affirm any affidavit in support of the Assessment and the witnesses had no personal knowledge of the truth of the contents of the two WS.

As for issue (ii), the Counsel for the 1st and 2nd Defendants had contended that the inventive step of the Patent is to reduce cost of transportation and storage space. Hence, the Plaintiff has only lost, if at all, income derived from the licensing of the Patent to manufacturers of the Patented product and therefore Royalty Basis cannot be applied in this Assessment because the Plaintiff has not previously granted license to a third party for the use of the Patent. In this case, the Counsel had applied that Lost Profit Basis that may be computed from the view point of the sales of the infringing products (not from the perspective of sales of the patented products). It is a fact that the Amended High Court’s decision that the 1st and 2nd Defendants had indeed infringed the Patent by selling the infringing products (Types 2 to 4). Therefore, once a product is proven to have infringed a patent, any sale of the product constitutes an interference with the sale of the patented product.

It was further submitted that the Plaintiff should not be entitled to claim loss of profit for all the infringing products due to the fact that there was no evidence to prove that but for the patent infringement, the Plaintiff would have sold all the infringing products. Also, the sales of the patented product by the Plaintiff have increased over the years. Accordingly, the patent infringement did not divert any of the sales of the patented product to the 1st and 2nd Defendants. The Plaintiff also should have produced evidence to show that purchasers of box files had gone for the patented product and was misled into buying the infringing products.

In this regard, the Court has decided that the Plaintiff was entitled to claim for loss of profit arising from all the infringing products because it is probable that a reasonable customer of a box file would have purchased an infringing product thinking that such a product is a patented product.

The Court had partially allowed the appeal on the basis that (i) the SAR’s order is set aside in its entirety, (ii) the 1st and 2nd Defendants shall pay to the Plaintiff as damages for patent infringement in the amount of MYR1,558,472.45 (Reassessed Damages), (iii) the 1st and 2nd Defendants also must pay a 5% interest rate per annum on the Reassessed Damages from 30 March 2017 (being the date of reinstatement of the Assessment) until the date of full payment of the Reassessed Damages; and (iv) no order of costs is made for the Assessment before the SAR and for this appeal.