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“Springboard” account of profats

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“Springboard” account of profats

10 May 2011

Bayer Cropscience KK v Charles River Laboratories Preclinical Services Edinburgh Ltd. & Anr. 2011 SLT 145

In this case, Lord Malcolm considered whether or not a claim for an account of profits in respect of patent infringement can be advanced under Section 61(1) of the Patents Act 1977 in circumstances where the actual profits sought to be recovered arise from non-infringing sales made following the expiry of the patent. This case represents the first authoritative consideration of this issue by the United Kingdom courts.

The pursuer in this action is involved in the development and marketing of insecticides, including a patented product called imidacloprid. It formerly held both European and US Patent in respect of that product. The US and European patents expired in January and March 2006 respectively. The first defender is a laboratory testing company based in Scotland. The second defender is a US competitor of the pursuer.

The pursuer raised proceedings for patent infringement against the defenders in the following circumstances:- In March 2005, the second defender had sought to register an insecticide with the United States Environmental Protection Agency ("the EPA") which contained imidacloprid. Registration of the product was a necessary precursor to putting the product on the market. As part of the registration process, the second defender required to submit test data to the EPA. In order to obtain that data, it imported a quantity of imidacloprid into the United Kingdom for testing by the first defender. It was not disputed by the defenders that this importation and testing, during the currency of the European patent, amounted to patent infringement. In addition, it was admitted by the second defender that it had instructed the testing during the currency of the patents in order to be able to gain a market advantage over other competitors by achieving entry to the US market at the earliest possible date following expiry of the patents.

The pursuer sought an account of profits in respect of (i) all profits made by the defender from sale of its products during 2006 on the basis that, but for the infringement, the second defender could not have put the products on the market until December 2006, and (ii) all profits made as a direct result of early entry into the marketplace in 2006, in the form of enhanced levels of sales in 2007 and 2008.

The second defender argued that this claim was irrelevant for a number of reasons, the most fundamental of which was that its insecticide product, containing imidaclporid, was not actually placed on the market in the US until April 2006, following the expiry of both patents. As a result, the second defender maintained that the profits made from the sale of the product did not fall to be regarded as profits "derived by (the infringer) from the infringement" under Section 61(1)(d) of the Patents Act 1977. In particular, it was said that the profits arose from lawful post-expiry sales, and not from any infringing act.

However, Lord Malcolm rejected this argument and found in favour of the pursuer, allowing a Proof Before Answer. In particular, Lord Malcolm held that, albeit the sales themselves had not infringed either of the pursuer's patents, looking at the whole circumstances (including the admitted purpose of the admitted infringement), it was not easy to identify any fundamental flaw in the proposition that at least some of the profits were derived from the wrongful act and the authorities either supported, or did not undermine, that impression.

Richard Keen QC (Dean of Faculty) and Roisin Higgins, Advocate of Axiom Advocates acted for the pursuer. Heriot Currie QC of Axiom Advocates acted for the defenders.