Asia File Products Sdn. Bhd. v 1. Brilliant Achievement Sdn. Bhd. (D-22IP-47-2010)

BRILLIANT ACHIEVEMENT SDN. BHD. (Co. No.: 197450-T)

LION FILE MARKETING SDN. BHD. (Co. No.: 628977-P)

KHOO KOK SEANG (NRIC No.: 590316-07-5811) … DEFENDANTS JUDGMENT (Court enclosure no. 49 - Appeal to High Court Judge against Senior Assistant Registrar’s assessment of damages)

This is an appeal to the High Court Judge (This Appeal) against the learned Senior Assistant Registrar’s (SAR) assessment of compensatory damages for patent infringement (Assessment). This Appeal raises the following issues:

in an assessment of damages, can a patent owner rely on witness statements (WS) adduced at the trial by merely exhibiting the WS in 2 an affidavit affirmed by a person (other than the witnesses who gave the WS) in support of the assessment? This novel question discusses the purpose of an exhibit in an affidavit, in contradistinction to an averment in the affidavit;

what is the basis to assess compensatory damages for patent infringement under s 60(1) of the Patents Act 1983 (PA)? In this regard -

whether the court may consider the royalty or license fee which should be paid by a patent infringer to the patent owner (Royalty Basis). The Royalty Basis is also known as the “User” principle;

should the court consider the patent owner’s loss of profit due to the patent infringer’s sales of the infringing product which the patent owner would have made if not for the patent infringement [Lost Profit Basis)? The Lost Profit Basis has been described as a diversion of patent owner’s sales by patent infringer;

whether a patent owner can claim for loss of profits caused by “price erosion” (Price Erosion Loss). A patent owner suffers Price Erosion Loss when the patent owner cannot sell the patented product at a desired higher price or is constrained to reduce the price of the patented product because of the lower price of the infringing product. There is no previous Malaysian case on Price Erosion Loss; 3

can the court consider the loss of sales of the patented product by the marketing and distribution arms of the patent owner?; and

is a patent owner required to adduce expert evidence in support of an assessment?; and

whether the court should exercise its discretion under s 11 of the Civil Law Act 1956 (CLA) and O 42 r 12 of the Rules of Court 2012 (RC) to order interest at the rate of 5% per annum on the amount of compensatory damages determined at the Assessment (Assessed Damages) to commence from a date later than the date of the High Court’s judgment regarding patent infringement because the Plaintiff had been guilty of inordinate delay in applying for directions regarding the Assessment under O 37 r 1(1) RC. B. Background

The plaintiff company (Plaintiff) has registered patent no. MY-137755-A (Patent) under PA regarding a “box file” (Patented Product). A box file is used to keep documents. The Patent concerns box files which can be installed without any tools and has a clip/clamp which holds filed documents.

The first defendant company (1st Defendant) manufactures stationeries, including box files (1st Defendant’s Products). The 1st Defendant’s Products are marketed, distributed and sold by the second defendant company (2nd Defendant) which is related to the 1st Defendant. The Assessment did not concern the third defendant, a director of the 1st and 2nd Defendants. 4

Before the institution of the original action by the Plaintiff (Original Action), the 1st Defendant produced four types of box files, namely Type 1 to Type 4 (4 Types).

In the Original Action, the Plaintiff had claimed that, among others, the sales of the 4 Types by all the defendants have infringed the Patent. There was a counterclaim by the 1st Defendant to invalidate the Patent (Counterclaim).

After a trial, Azahar Mohamed J (as he then was) decided as follows, among others, on 29.5.2012 (High Court’s Decision):

the Counterclaim was dismissed; and

the Original Action was allowed to the extent that the 1st and 2nd Defendants had infringed the Patent (Patent Infringement).

The appeal by the defendants to the Court of Appeal against the High Court’s Decision was dismissed with costs.

The Plaintiff had elected for the court to assess compensatory damages to be paid by the 1st and 2nd Defendants to the Plaintiff for the Patent Infringement.

On 10.4.2014, Azizah Nawawi J allowed an application by the defendants to amend the High Court’s Decision and held that Types 2, 3 and 4 of the 1st Defendant’s Products (Infringing Products) had infringed the Patent (Amended High Court’s Decision). The Plaintiff did not appeal to the Court of Appeal against the Amended High Court’s Decision. 5

The Plaintiff did not file an application for directions regarding the Assessment within the one-month time period from the date of the High Court’s Decision [as required by O 37 r 1(1) RC]. On 27.6.2016, the Plaintiff applied to the learned Deputy Registrar (DR) for, among others, an extension of time under O 3 r 5(1) RC to apply for directions regarding the Assessment (Court Enc. 35).

On 14.12.2016, the learned DR dismissed Court Enc. 35 with costs (DR’s Decision). The Plaintiff then appealed to the High Court Judge against the DR’s Decision (Court Enc. 39).

On 30.3.2017, I allowed Court Enc. 39 on the ground that it was in the interest of justice for the Plaintiff to be granted an extension of time under O 3 r 5(1) RC to proceed with the Assessment. I made the following order in Court Enc. 39 (Extension Of Time Order):

the DR’s Decision was set aside and the Assessment was therefore reinstated;

the Assessment should be conducted by the learned SAR (not by the learned DR who had set aside the Assessment); and

costs of RM7,000 shall be paid within 7 days from 30.3.2017 by the Plaintiff to the 1st and 2nd Defendants due to the Plaintiff’s inordinate delay of 2 years 2 months 26 days in applying to the court for directions regarding the Assessment (Plaintiff’s Delay). There was no appeal to the Court of Appeal against the Extension of Time Order. 6 C. SAR’s assessment

In summary, the learned SAR decided as follows:

the learned SAR accepted the Plaintiff’s reliance on two WS adduced at the trial of this case that the 1st Defendant had used the Infringing Products since at least 2005. As such, the learned SAR conducted the Assessment from January 2006 until the date of the High Court’s Decision (29.5.2012);

the learned SAR applied the Lost Profit Basis and Price Erosion Loss (as submitted by the Plaintiff) in deciding the Assessment;

the learned SAR rejected the Plaintiff’s claim for loss of sales of the Patented Product by the Plaintiff’s marketing and distribution arms;

based on the above reasoning, the Assessed Damages by the learned SAR was RM3,122,671.00; and

interest at the rate of 5% per annum on the amount of Assessed Damages was awarded from the date of the High Court’s Decision (29.5.2012) until full payment of the Assessed Damages. D. Judicial approach

As an appellate court hearing This Appeal under O 56 r 1(1) RC, I adopt the following approach:

as a general rule, an appellate court is reluctant to intervene in respect of a lower court’s assessment of compensatory damages - 7 please see Mohamad Ariff J’s (as he then was) judgment in the Court of Appeal in Goo Sing Kar v Dato’ Lim Ah Chap & Ors [2013] 3 MLJ 374, at paragraphs 29-31 (assessment based on an undertaking to pay damages regarding ex parte injunctions); and

exceptionally, an appellate court may only set aside a subordinate court’s quantification of compensatory damages if -

the lower court has acted on a wrong principle of law; or

the subordinate court has awarded an amount of compensatory damages which is so extremely high or so extremely low and this sum constitutes an entirely erroneous estimate of compensation to which a plaintiff is entitled - please see Edgar Joseph Jr FCJ’s judgment in the Federal Court case of Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings Sdn Bhd [1994] 3 MLJ 777, at 799 (assessment of damages for breach of contract). E. Whether patent owner could rely on WS adduced at trial without any affidavit from witness who gave WS

The relevant parts of O 37 r 1, O 38 r 2(2), O 41 r 5(1), (2) and r 11(1) RC provide as follows: “Assessment of damages by Registrar O 37 r 1(1) Where judgment is given for damages to be assessed and no provision is made by the judgment as to how they are to be assessed, the damages shall, subject to the provisions of this Order, 8 be assessed by the Registrar, and the party entitled to the benefit of the judgment shall, within one month from the date of the judgment, apply to the Registrar for directions and the provisions of Order 34 shall, with the necessary modifications, apply.

On the hearing of the application for directions, the Registrar may, in addition to making such orders as are necessary and appropriate under Order 34, give directions as to the time by which a notice of appointment for assessment of damages shall be filed and such notice upon being filed shall, notwithstanding anything in Order 62, rule 10, be served not later than seven days thereafter on the party against whom the judgment is given. … …

The attendance of witnesses and the production of documents before the Registrar in proceedings under this Order may be compelled by subpoena, and the provisions of Order 35 shall, with the necessary adaptations, apply in relation to those proceedings as they apply in relation to proceedings at the trial. …

A party shall not file a notice of appointment for assessment of damages by the Registrar pursuant to this rule unless directions for filing and exchange of affidavit evidence pursuant to Order 34 have been given or complied with, as the case may be. … O 38 r 2(2) In any cause or matter begun by originating summons and on any application made by notice of application, evidence shall be given by affidavit unless in the case of any such cause, matter or application any provision of these Rules otherwise provides or the Court otherwise directs, but the Court may, on the application of any party, order the attendance for cross-examination of the person making any such affidavit, and where, after such an order has been made, the person in question does not attend, his affidavit shall not be used as evidence without the leave of the Court. 9 Contents of affidavit O 41 r 5(1) Subject to Order 14, rules 2(2) and 4(2), to paragraph (2) of this rule and to any order made under Order 38, rule 3, an affidavit may contain only such facts as the deponent is able of his own knowledge to prove.

An affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information of belief with the sources and grounds hereof. Document annexed to affidavit O 41 r 11(1) Any document to be used in conjunction with an affidavit shall be exhibited and a copy thereof annexed to the affidavit.” (emphasis added).

My research is not able to reveal any previous case on whether a party in an assessment of compensatory damages may rely on a WS by merely exhibiting the WS to an affidavit (not affirmed by the witness) in support of the assessment.

I am of the following view regarding assessment of compensatory damages:

generally, an assessment of compensatory damages is decided by affidavits - please see O 38 r 2(2) RC;

according to O 37 r 1(2) and (6) RC, the Registrar may give directions regarding the filing and exchange of affidavits for the purpose of the assessment; 10

an exhibit in an affidavit is to explain or prove an allegation affirmed in an affidavit. As provided in O 41 r 11(1) RC, an exhibit is only “used in conjunction with an affidavit”. An exhibit, in itself, is not a sworn averment and cannot be its substitute;

an assessment of compensatory damages is not an “interlocutory proceedings” within the meaning of O 41 r 5(2) RC. Accordingly, by virtue of O 41 r 5(1) RC, a deponent of an affidavit filed in an assessment should have personal knowledge of the contents of the affidavit - please see Mahadev Shankar JCA’s judgment in the Court of Appeal in Lim Yew Sing v Hummel International Sports & Leisure A/S [1996] 3 MLJ 7, at 12, 15 and 16;

if there is a conflict in affidavit evidence, a party may apply to the court under O 38 r 2(2) RC for leave to cross-examine a deponent who has filed an affidavit in the assessment - please see Charles Koo Ho-Tung & Ors v Koo Lin Shen & Ors [2016] 2 CLJ 267, at paragraphs 51, 52 and 54-59;

if a party (X) is not able to obtain an affidavit from a person (Y) for the purpose of the assessment, X may apply for a subpoena from the court to compel Y to give evidence at the assessment - please see O 37 r 1(4) RC. When Y appears to testify at the assessment, Chapter X of the Evidence Act 1950 (EA) (regarding examination of witnesses) shall apply to Y’s testimony;

X may apply for a subpoena pursuant to O 37 r 1(4) RC to compel any person to produce documents which may be relevant to the assessment; and 11

parties in an assessment can only rely on WS, oral evidence and documents adduced at a trial (Trial Evidence) if the Trial Evidence has been affirmed by a deponent (Z) in an affidavit filed in the assessment. Needless to say, Z should have personal knowledge of the Trial Evidence. If otherwise, the contents of Z’s affidavit regarding the Trial Evidence would constitute hearsay evidence which is not admissible under O 41 r 5(1) RC - please see Tokai Corporation v DKSH Malaysia Sdn Bhd [2016] MLJU 621, at sub-paragraph 16(2) (the appeal to the Court of Appeal against the decision in Tokai Corporation has been withdrawn). A party who opposes Z’s affidavit, may apply to court under O 38 r 2(2) RC to cross-examine Z regarding the truth of the contents of Z’s affidavit.

At the trial of this case, the Plaintiff called, among others, the following two witnesses (2 Witnesses):

Ms. Jenny E Suan Ying; and

Mr. Tan Peng Boon (Mr. Tan). Mr. Tan is a former sales personnel of the 2nd Defendant. For the Assessment, the WS of the 2 Witnesses (2 WS) had been exhibited in an affidavit affirmed by Dato’ Lim Soon Huat (Dato’ Lim) on 27.4.2017. The 2 Witnesses did not affirm any affidavit regarding the 2 WS or the Assessment.

I am of the view that the learned SAR has committed an error in admitting the 2 WS as evidence and by giving weight to them in the Assessment (1st Error). This decision is based on the following reasons: 12

the 2 Witnesses did not affirm any affidavit in support of the Assessment. The 2 WS were merely exhibited in Dato’ Lim’s affidavit and Dato’ Lim had no personal knowledge of the truth of the contents of the 2 WS. As such, the 2 WS constituted hearsay under O 41 r 5(1) RC which should have been excluded as evidence by the learned SAR - please see Tokai Corporation;

if the 2 Witnesses did not wish to affirm affidavits regarding the Assessment, there was no reason why the Plaintiff could not have applied to the learned SAR under O 37 r 1(4) RC to issue subpoenas to compel them to testify in the Assessment; and

the 1st and 2nd Defendants are irreparably prejudiced by the 2 WS because they could not have applied for leave of the learned SAR to cross-examine the 2 Witnesses pursuant to O 38 r 2(2) RC. This is understandable as the 2 Witnesses have not affirmed any affidavit in the Assessment. F. Whether Plaintiff’s loss of profit is too remote to be recoverable

Firstly, the Plaintiff can only claim for a loss or damage which is not too remote in law to be recoverable from the 1st and 2nd Defendants. In Gerber Garment Technology Inc v Lectra Systems Ltd & Anor [1975] RPC 443, at 452 (assessment of damages for patent infringement), Staughton LJ in the United Kingdom’s (UK) Court of Appeal held that a patent owner can only recover a loss or damage for patent infringement which is -

foreseeable; and 13

not barred by public or social policy.

Premised on Gerber Garment Technology, the Plaintiff’s loss of profits (Plaintiff’s Loss) due to the Patent Infringement are not too remote to be recoverable from the 1st and 2nd Defendants because -

the Plaintiff’s Loss is reasonably foreseeable because the Patented Product and Infringing Products are similar in kind and purpose. In fact, the Plaintiff’s business regarding the Patented Product competed with the sales of the Infringing Products by the 1st and 2nd Defendants; and

there is no consideration of public policy which bars the claim for the Plaintiff’s Loss. G. Was Plaintiff’s Loss “caused” by Patent Infringement?

Regarding the issue of causation of loss or damage, I am of the following view:

in Gerber Garment Technology, at p. 452, Staughton LJ decided that a patent owner can only claim for a loss or damage -

which would not have occurred “but for” the patent infringement; and

where as a matter of common sense, the patent infringement is the “cause” of the loss or damage; and 14

previous cases on causation regarding patent infringement, as for all other causes of action, depend on their particular facts. Accordingly, previous judgments on causation of loss or damage arising from patent infringement, cannot constitute binding legal precedents from the view point of the stare decisis doctrine.

The learned SAR did not err in deciding that the Plaintiff’s Loss is “caused” by the Patent Infringement because -

the Plaintiff’s Loss would not have occurred “but for” the Patent Infringement. This is due to the fact that the Patented Products and Infringing Products are similar and compete with each other in the market; and

in view of the similar nature and purpose of the Patented Products and Infringing Products, as a matter of common sense, the Plaintiff’s Loss is “caused” by the Patent Infringement. H(1). How to assess compensatory damages for patent infringement?

Section 60(1) PA provides as follows: “Injunction and award of damages 60(1) If the owner of the patent proves that an infringement has been committed or is being committed, the Court shall award damages and shall grant an injunction to prevent further infringement and any other legal remedy. ” (emphasis added). 15 Section 60(1) PA does not provide a basis for measuring damages for patent infringement. I am also not aware of any Malaysian case which has discussed the approach to be taken to assess damages for patent infringement.

In assessing compensatory damages for patent infringement under s 60(1) PA, I adopt the following approach based on my understanding of the relevant cases:

the object of compensatory damages is to compensate a patent owner and not to punish a patent infringer - please see Lord Wilberforce’s judgment in the House of Lords in General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 2 All ER 173, at 177 (a patent infringement case);

the general principle of restitutio in integrum applies, namely the amount of compensatory damages should as nearly as possible put a patent owner in the same position as the patent owner would have been in if there has not been a patent infringement - General Tire & Rubber Co, at p. 177;

the court should ensure that a patent owner is not unjustly enriched or overcompensated and at the same time the court should prevent a patent infringer from being financially ruined in an unjust manner - please see Motordata Research Consortium Sdn Bhd v Ahmad Shahril bin Abdullah & Ors [2017] 7 AMR 560, at sub-paragraph 75(2) (a case based on copyright infringement, tort of breach of confidence, tort of unlawful interference with Plaintiff’s business and tort of conspiracy by unlawful means). The appeal to the Court of 16 Appeal against the judgment in Motordata Research Consortium has been discontinued;

previous cases on assessment of compensatory damages should only be referred to as the court’s previous approach (not as a rule of law) in a similar factual situation - General Tire & Rubber Co, at p. 177;

a patent owner has the evidential burden to prove that the patent owner has suffered loss and damage due to the patent infringement - please see the decision of Richard Malanjum CJ (Sabah & Sarawak) (as he then was) in the Federal Court case of Taiping Poly (M) Sdn Bhd v Wong Fook Toh & Ors [2011] 3 CLJ 837, at paragraph 17 (regarding assessment of damages for trade mark infringement and tort of passing off). If a patent owner fails to discharge the onus to prove any loss or damage arising from patent infringement, the patent owner is only entitled to nominal damages - please see Edgar Joseph Jr FCJ’s judgment in the Federal Court in Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings Sdn Bhd [1994] 3 MLJ 777, at 799 (breach of contract case); and

in General Tire & Rubber Co, at p. 177, Lord Wilberforce held that “damages should be liberally assessed”. This has been explained by Males J in the English High Court case of Fiona Trust & Holding Corporation v Privalov & Ors [2017] 2 All ER 570, at paragraphs 49 and 50 (assessment of damages based on undertaking regarding a freezing order), as follows - 17 “49. There was some debate whether a “liberal assessment” of damages is appropriate. The origin of this phrase is the speech of Lord Wilberforce in a case concerned with damages for patent infringement, General Tire & Rubber Co Ltd v Firestone Tyre & Rubber Co Ltd [1975] 1 WLR 819: “There are two essential principles in valuing the claim: first, that the plaintiffs have the burden of proving their loss; second, that the defendants being wrongdoers, damages should be liberally assessed but that the object is to compensate the plaintiffs and not to punish the defendants.”

The principle of “liberal assessment” was applied to an inquiry as to the damages caused by an interim injunction by Norris J in Les Laboratoires Servier v Apotex Inc [2008] EWHC 2347 (Ch), [2009] FSR 3. This was endorsed by the Court of Appeal in AstroZeneca AB v KRKA dd Novo Mesto [2015] EWCA Civ 484 at [16]. The question arose in the context of a statement by Norris J, also endorsed by the Court of Appeal, that although it is for the party seeking damages to establish its loss, the court should not be over eager in its scrutiny of the evidence or too ready to subject its methodology to minute criticism, in part because the very nature of the exercise renders precision impossible. Kitchin LJ referred at [16] to the need for “a liberal but fair assessment of loss". ” (emphasis added). H(2). Can Royalty Basis be invoked in this case?

It was decided in Schwan-Stabilo Marketing Sdn Bhd v S & Y Stationery & Ors [2018] 9 CLJ 384, at sub-paragraph 21(1) 18 (assessment of damages for trade mark infringement, tort of passing off and tort of unlawful interference with trade), as follows: “21. My understanding of case law regarding the Royalty Basis is as follows:

where a plaintiff has previously granted licenses to third parties for the use or exploitation of the plaintiff’s IP rights, the court may use the Royalty Basis to assess the plaintiff’s loss of royalty or license fee due to the defendant’s infringement of the plaintiff’s IP rights - please see Lord Wilberforce’s judgment in General Tire & Rubber Co, at p. 178; …” (emphasis added).

Mr. Foong Cheng Leong, learned counsel for the 1st and 2nd Defendants, has 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. I am not able to accept this submission. In my view, based on Schwan-Stabilo Marketing, it is not appropriate to apply Royalty Basis in this case because there is no evidence that the Plaintiff has previously granted licenses to third parties for the use or exploitation of the Patent. H(3). Whether court should apply Lost Profit Basis

In Schwan-Stabilo Marketing, at paragraph 19, I have explained how Lost Profit Basis is applied from the view point of the loss of a plaintiff’s sales due to a wrong committed by the defendant: 19 “19. According to Taiping Poly, at paragraphs 19-36, the Lost Profit Basis is applied in the following manner - Value of sales of plaintiff’s goods (subject matter of trade mark infringement and/or passing off) (Specific Goods) Figure A Business profits (before tax) enjoyed by plaintiff regarding Specific Goods

Expenses regarding Specific Goods are taken into account to derive plaintiff’s business profits.

Taxes are excluded from computation of plaintiff’s business profits. Figure B Percentage of profit margin for Specific Goods [Figure B/Figure A] x 100% = C% Loss of sales of Specific Goods - a comparison between volume of plaintiff’s sales of Specific Goods before commission of the wrong and volume of plaintiff’s sales of Specific Goods after the commission of the wrong Figure D Loss of business profits regarding Specific C% X Figure D 20 Goods suffered by plaintiff due to defendant’s wrong = Figure E

a plaintiff has to exclude customers of the defendant who are not misled in making their purchase of the defendant’s goods - Taiping Poly, at paragraph 19. There is no presumption that the infringing goods sold by a defendant, would have been sold by the plaintiff - Taiping Poly, at paragraph 17. In other words, a plaintiff has to prove actual loss of business profits due to the defendant’s wrong;

the amount of loss of sales of a plaintiff’s goods (the subject matter of trade mark infringement or the tort of passing off) is not the plaintiff’s loss of business profits. In Taiping Poly, at paragraph 23, the High Court Judge set aside the learned Senior Assistant Registrar’s (SAR) assessment of compensatory damages based on the quantum of loss of sales by the plaintiff company. The High Court Judge’s decision on this point had been affirmed by the Court of Appeal and Federal Court respectively;

in applying Loss Profits Basis, overhead expenses should be considered - Taiping Poly, at paragraph 31;

taxes are excluded in the computation of a plaintiff’s loss of business profits - Taiping Poly, at paragraph 31. In this regard, I am of the view that Goods and Services Tax should not be included in the application of Loss Profits Basis;

the court has to ascertain the profit margin of a plaintiff’s goods (the subject matter of trade mark infringement or the tort of passing off);

Figure E will be the loss of business profits suffered by a plaintiff due to the 3 Causes of Action; and 21

loss of business profits should be assessed liberally - Taiping Poly, at paragraph 19.” (emphasis added).

Lost Profit Basis may be computed from the view point of the sales of the infringing products (not from the perspective of sales of the patented products). I rely on the following judgments from UK:

in the House of Lords case of The United Horse-Shoe & Nail Co Ltd v John Stewart & Co (1888) 13 App Cas 401 (patent infringement case) -

Lord Halsbury LC held as follows, at p. 408 - “The actual infringement complained of consists of the sale of cases of nails produced by patent machines which are admitted to be infringements of the pursuers' patents. Every nail thus produced was an infringement of the pursuers' patent, the sale of which could have been interdicted, and would give a right of action against all concerned in its production and sale. … The cases of nails tales quales were infringements, and in so far as these nails, such as they were, interfered with the sale of the pursuers' own goods, they were properly the measure of the damages which the pursuers were entitled to obtain. I say so far as they interfered with the sale of the pursuers' own goods, and while I agree with the Lord Ordinary that the pursuers can only recover compensation for the actual loss which they have sustained, the estimate of the particular sum which is to be arrived at when assessing compensation for the injury is purely a matter for 22 a jury, and can rarely be made the subject of exact arithmetical calculation.” (emphasis added); and

according to Lord Macnaghten, at p. 416 - “There remains the other head of damage: loss of sales by reason of the competition of the respondents. I think the appellants are entitled to take into account the total quantity of nails sold by the respondents and that they are not limited, as the Lord Ordinary held they were, to the period commencing on the 27th of June, 1883. Although that was the date on which the appellants acquired their title to the patents, they succeeded to the rights and to the property of their predecessors in title.” (emphasis added); and

at the High Court level in Gerber Garment Technology Inc v Lectra Systems Ltd & Anor [1995] RPC 383, at 394, Jacob J (as he then was) decided as follows - “5. Where the patentee has exploited his patent by manufacture and sale, he can claim:

lost profit on sales by the defendant he would have made otherwise;

lost profit on his own sales to the extent that he was forced, by the infringement, to reduce his own price; and

a reasonable royalty on sales by the defendant which he would not have made. 23 This principle is easy enough to state, but involves difficult questions of fact or estimation. …” (emphasis added). It is to be noted that Jacob J’s decision in Gerber Garment Technology has been affirmed on most grounds by the Court of Appeal, [1997] RPC 443.

Based on United Horse-Shoe & Nail Co and the High Court’s decision in Gerber Garment Technology, I am of the view that in quantifying the Plaintiff’s Loss, the learned SAR has not committed any error in applying Lost Profit Basis based on the sales of the Infringing Products. This decision is premised on the following reasons:

the Amended High Court’s Decision has made it clear that the 1st and 2nd Defendants have infringed the Patent by selling the Infringing Products (Types 2 to 4);

the 1st and 2nd Defendants had provided information regarding the quantity of sales of Infringing Products and such information had not been disputed by the Plaintiff; and

according to s 36(3)(a)(i) and 58 PA, the 1st and 2nd Defendants should not have -

offered for sale the Infringing Products; and

sold the Infringing Products. I reproduce the relevant parts of s 36(3)(a)(i) and 58 PA as follows - 24 “36(3) For the purposes of this Part, “exploitation” of a patented invention means any of the following acts in relation to a patent:

when the patent has been granted in respect of a product:

making, importing, offering for sale, selling or using the product; … Acts deemed to be infringement 58. Subject to subsections 37(1), (2) and (3) and section 38, an infringement of a patent shall consist of the performance of any act referred to in subsection 36(3) in Malaysia by a person other than the owner of the patent and without the agreement of the latter in relation to a product or a process falling within the scope of protection of the patent.” (emphasis added). In view of ss 36(3)(a)(i) and 58 PA, 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 - United Horse-Shoe & Nail Co. H(4). Is Plaintiff entitled to loss of profit for all Infringing Products?

Mr. Foong has submitted that the Plaintiff is not entitled to claim loss of profit for all the Infringing Products due to the following reasons:

there was no evidence to prove that but for the Patent Infringement, the Plaintiff would have sold all the Infringing Products; 25

except for 2011, the sales of the Patented Product have increased over the years. In other words, the Patent Infringement did not divert any of the sales of the Patented Product to the 1st and 2nd Defendants;

there is no presumption that all the Infringing Products would have been sold by the Plaintiff. The Plaintiff should have led evidence to show that purchasers of box files have sought for the Patented Product and have been misled into buying the Infringing Products;

the Infringing Products had been sold because of their own price, good quality, economic environment, brand name, colour and market conditions which did not constitute Patent Infringement. In other words, the Patent did not play any part in the decision of purchasers to buy the Infringing Products;

the Infringing Products had been sold due to a long business relationship between -

the 1st and 2nd Defendants on the one part, and

the distributors and retailers of the 1st and 2nd Defendants on the other part;

the efforts of the 1st and 2nd Defendants in the advertising, promoting, marketing and branding of the Infringing Products, had contributed to their sales; and 26

no evidence had been tendered by the Plaintiff to show that the Plaintiff’s factory had the capacity to manufacture and supply the quantity of Infringing Products. Mr. Foong has relied on, among others, Lord Atkinson’s judgment in the House of Lords in Watson, Laidlaw & Co Ltd v Pott, Cassels & Williamson (1941) 31 RPC 104, at 115 (a patent infringement case), as follows: “It is, in my view, impossible to suppose that two keen business men like Hellendoorn and Akkerman would have purchased the appellants' machines if they did not believe they could resell them, and equally impossible to suppose that they would have distributed these circulars and drawings, and made the statements above mentioned, if they were not confident that the sale of the machines they so purchased would be stimulated by pointing out their resemblance to the respondents' machines. It may well be that the sales of the appellants' machines in Java were increased owing to the push and popularity of Akkerman. Due allowance should be made for that; but bearing in mind that the respondents' machines were extensively sold in Java, and were well known there and elsewhere, it is only reasonable to conclude that, if the appellants had not infringed, a considerable percentage of the persons who purchased the appellants' machines would have purchased those of the respondents.” (emphasis added).

I am of the view that the learned SAR has not erred in deciding that the Plaintiff’s Loss due to the Patent Infringement consists of all the Infringing Products and no reduction should therefore be given in favour 27 of the 1st and 2nd Defendants. This decision is based on the following reasons:

the Patented Products and Infringing Products are box files which are similar. 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;

in Gerber Garment Technology Inc v Lectra Systems Ltd & Anor [1995] RPC 383, at 394, Jacob J decided as follows in the High Court - “4. It is irrelevant that the defendant could have competed lawfully. Sometimes defendants have sought to evade substantial liability by contending that they could have avoided infringement, for instance by using some other equally efficacious but non-infringing device. They suggest that they could have inflicted the same economic “injury” by lawful competition. The courts have consistently rejected this approach. The rejection follows from the compensation principle. One is concerned with compensation for what the defendant has done by acting “improperly”. …” (emphasis added). Based on the above judgment, if I have acceded to Mr. Foong’s submission in the above paragraph 31, this court would have allowed patent infringers (such as the 1st and 2nd Defendants) to evade liability to the Plaintiff under ss 36(3)(a)(i) and 58 PA; and 28

the above decision by the learned SAR is “a liberal but fair assessment of loss” as explained in General Tire & Rubber Co and Fiona Trust & Holding Corporation.

In any event, sitting as an appellate Judge, there is no ground for appellate intervention regarding the learned SAR’s finding of fact that the Plaintiff’s loss of profit due to the Patent Infringement comprises all the Infringing Products - Goo Sing Kar.

I have not overlooked the 3-1 majority decision of the House of Lords in Watson, Laidlaw & Co. In Watson, Laidlaw & Co -

the Lord Ordinary in the Outer House of the Court of Session (Scottish court of first instance) awarded damages of £1,500 only based on the quantity of infringing products sold by the appellants;

on appeal, the Inner House of the Court of Session increased the award of damages to £3,000; and

a majority decision of the House of Lords dismissed the appeal. It is clear that the passage of Lord Atkinson’s judgment cited by Mr. Foong is merely obiter as his Lordship was part of the majority decision which did not reduce the award of damages on the ground that the number of infringing products (for the purpose of assessing damages) should be reduced because of the “push and popularity” of one person (Mr. Akkerman). The facts of Watson, Laidlaw & Co are clearly distinguishable from this case which concerns box files where reasonable purchasers of box files 29 can be easily misled or confused between Patented Products and Infringing Products. H(5). Whether Plaintiff can claim for Price Erosion Loss

The learned SAR accepted the contention by Ms. Michelle Loi Choi Yoke, learned counsel for the Plaintiff, that the Plaintiff was entitled to claim for Price Erosion Loss. According to Ms. Michelle Loi, as a result of the Patent Infringement, the Plaintiff and its three marketing and distribution arms (3 Companies) cannot sell the Patented Product at RM8.50 per unit. The 3 Companies are -

Sin Chuan Marketing Sdn. Bhd.;

ABBA Marketing Sdn. Bhd.; and

Formosa Technology Sdn. Bhd.

Ms. Michelle Loi has relied on the following UK cases:

Cotton LJ’s judgment in the Court of Appeal case of American Braided Wire Co v Thomson (1886) 44 Ch D 274 (a patent infringement case); and

the decision of Kitchin J (as he then was) in the High Court in Ultraframe (UK) Ltd v Eurocell Building Plastics Ltd & Anor [2006] EWHC 1344 (a patent infringement case).

I am not able to find any previous Malaysian case regarding Price Erosion Loss. 30

Firstly, based on the High Court’s judgment in Gerber Garment Technology, at p. 394, I accept that a patent owner can claim for Price Erosion Loss if the patent owner can prove cumulatively the following two matters:

the patent owner has to reduce the price of the patented product (Price Reduction) to enable the patented product to compete in the market with an infringing product; or

the patent owner cannot increase the price of the patented product (No Price Increase) because of the lower price of the infringing product; and

the Price Reduction/No Price Increase is “caused” by the patent infringement in the sense that -

the Price Reduction/No Price Increase would not have happened “but for” the patent infringement; and

as a matter of common sense, the Price Reduction/No Price Increase is “caused” by the patent infringement - please see Staughton LJ’s judgment in UK’s Court of Appeal in Gerber Garment Technology, at p. 452.

I am of the view that the learned SAR has fallen into error in allowing the Plaintiff to claim for Price Erosion Loss (2nd Error) because -

there was no evidence adduced by the Plaintiff to show that the price of the Patented Product had ever been decreased by the Plaintiff. Nor was there evidence that the Plaintiff intended to 31 increase the price of the Patented Product but could not do so due to the lower price of the Infringing Products;

there was no evidence that -

the Price Reduction/No Price Increase by the Plaintiff would not have happened “but for” the Patent Infringement; and

as a matter of common sense, the Price Reduction/No Price Increase was “caused” by the Patent Infringement; and

the 2nd Error would have unjustly enriched the Plaintiff - please see please see Motordata Research Consortium, at sub-paragraph 75(2).

The material facts of American Braided Wire Co and Ultraframe are different from this case as follows:

in American Braided Wire Co, at p. 284-285 -

the patent owners first reduced the price of the patented product. The patent infringers subsequently decreased the price of the infringing product;

there was a second reduction in the price of the patented product. This was followed by a second decrease in the price of the infringing product; and

for a third time, the patent owners decreased the price of the patented product; and 32

in Ultraframe, at paragraph 118, there was evidence that -

the patent owner had increased the price of all its products except the patented product because of the competition with the infringing product; and

due to the competition with the infringing product, the price of patented product was gradually reduced in an attempt to retain the market share of the patented product. H(6). Can Plaintiff claim for loss of sales by its marketing and distribution arms?

Before the learned SAR, Ms. Michelle Loi has submitted as follows:

the Plaintiff sells the Patented Product through the 3 Companies. As such, the Plaintiff is entitled to claim from the 1st and 2nd Defendants for loss of profits from the sales of the 3 Companies (Loss of 3 Companies); and

reliance has been placed on the judgment of UK’s Court of Appeal in Gerber Garment Technology.

The learned SAR has rejected the Plaintiff’s claim for the Loss of 3 Companies (SAR’s Rejection). The Plaintiff did not file an appeal against the SAR’s Rejection under O 56 r 1(1) RC. Nor did the Plaintiff apply for an extension of time pursuant to O 3 r 5(1) RC to file an appeal out of time against the SAR’s Rejection. Accordingly, the SAR’s Rejection is final and cannot be revisited by the Plaintiff in This Appeal. 33

In any event, I find that the learned SAR is right to dismiss the Plaintiff’s claim for the Loss of 3 Companies because -

s 60(1) PA confers a statutory right on an “owner of the patent” [s 3 PA defines an “owner of a patent” as the person for the time being recorded in the “Register” (interpreted in s 3 PA as the Register of Patents)] to claim damages for patent infringement. The 3 Companies are not entitled under s 60(1) PA to claim for any remedy for Patent Infringement; and

the Plaintiff is entitled to claim for loss of profits based on all the Infringing Products [please see the above Part H(4)]. If the Plaintiff is allowed to claim for the Loss of 3 Companies, this will unjustly enriched the Plaintiff - Motordata Research Consortium, at sub-paragraph 75(2).

I am of the view that Gerber Garment Technology does not assist the Plaintiff because that case does not concern a claim by a patent owner for loss of profit from the sales of the patent owner’s marketing and distribution arms. H(7). Is expert evidence required to prove Plaintiff’s Loss?

Mr. Foong has relied on the following cases to submit that the Plaintiff should have called for an independent expert witness to prove the

the Court of Appeal’s judgment delivered by Mohamad Ariff Yusof JCA in Majuikan Sdn Bhd v Barclays Bank PLC [2014] 9 CLJ 337; 34

Mary Lim Thiam Suan JC’s (as she then was) decision in the High Court case of Fish & Co Restaurants Pte Ltd v Revenue Valley Sdn Bhd & Ors [2010] 1 LNS 432;

the judgment of Jagot J in the Federal Court of Australia in Bayer

Pharma Aktiengesellshaft v Generic Health Pty Ltd [2017] FCA It is to be noted that the Federal Court is not the apex court in

the judgment of the Federal Court delivered by Zulkefli Makinuddin PCA in U Television Sdn Bhd & Anor v Comintel Sdn Bhd [2017] 10 CLJ 580.

I am not able to accept the above contention for the following reasons:

none of the above cases cited by Mr. Foong requires the Plaintiff to adduce expert evidence in support of the Assessment. In this regard, it is decided in Syarikat Faiza Sdn Bhd & Anor v Faiz Rice Sdn Bhd & Anor [2019] 1 AMR 180, at paragraph 20 (assessment of damages for copyright infringement, trade mark infringement, tort of passing off and tort of unlawful interference with trade) as follows - “20. Firstly, there is nothing in s 45(1) EA or O 40A rr 1 to 3 RC which requires an accountant’s expert evidence to be adduced in support of a plaintiff’s claim for compensatory damages. Nor is there any written law which requires such an expert opinion. My research is unable to show any decided case in Malaysia and the other Commonwealth countries which requires a plaintiff to call an accountant to give expert evidence in support of the plaintiff’s claim for compensatory damages. On the contrary, there are many cases, including Taiping Poly, 35 which have awarded compensatory damages based solely on evidence of “non-experts”. Accordingly, the Plaintiffs are not required to adduce an accountant’s expert opinion to support this Assessment. Despite the above, there is nothing in law to prevent a plaintiff and/or defendant from tendering an accountant’s expert opinion to assist the Court in the assessment of compensatory damages. In an adversarial litigation system, parties in assessment proceedings have a discretion to adduce an accountant’s expert evidence as they see fit. Needless to say, it is a question of fact in each assessment proceedings as to whether the Court may accept an accountant’s expert view and to attach any weight thereto.” (emphasis added); and

this case concerns box files which does not involve any technical matter beyond the court’s competence. Hence, the Plaintiff is not required to adduce expert evidence in support of the Plaintiff’s Loss. I. Whether appellate intervention is warranted in this case

By reason of the 1st and 2nd Errors (please see the above paragraphs 19 and 39) (2 Errors) -

the learned SAR had acted upon wrong principles of law; and/or

the learned SAR had awarded an amount of compensatory damages which was so extremely high and this amount constituted an entirely erroneous estimate of compensation to which the Plaintiff was entitled. 36 - please see Tan Sri Khoo Teck Puat, at p. 799.

Due to the 2 Errors, it is now incumbent on this court to reassess compensatory damages to be paid by the 1st and 2nd Defendants to the Plaintiff - Tan Sri Khoo Teck Puat.

On 6.6.2018 -

I gave an oral decision regarding the above grounds (Oral Decision); and

the court invited Ms. Michelle Loi and Mr. Foong to submit on the amount of compensatory damages to be paid by the 1st and 2nd Defendants to the Plaintiff based on the Oral Decision (Reassessed Damages).

All the parties have filed further written submission regarding the Reassessed Damages. I accept the further submission by the 1st and 2nd Defendants [Further Submission (1st and 2nd Defendants)] and reject the Plaintiff’s further submission because of the reasons stated in the Further Submission (1st and 2nd Defendants). Based on the Further Submission (1st and 2nd Defendants), I find the Reassessed Damages to be in the sum of RM1,558,472.45. K. Court’s discretion to impose interest on damages

It is not disputed that the court has a discretion to impose interest on damages under s 11 CLA and O 42 r 12 RC and when such interest 37 should commence (Commencement Date) - please see BHS Book Printing Sdn Bhd v Penerbitan IMT Sdn Bhd [2016] 1 AMR 753, at paragraph 33. I reproduce below s 11 CLA and O 42 r 12 RC: “Power of Courts to award interest on debts and damages s 11 CLA In any proceedings tried in any Court for the recovery of any debt or damages, the Court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest as such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment: Provided that nothing in this section -

shall authorize the giving of interest upon interest;

shall apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise; or

shall affect the damages recoverable for the dishonour of a bill of exchange. Interest on judgment debts Order 42 rule 12 RC Subject to rule 12A, except when it has been otherwise agreed between the parties, every judgment debt shall carry interest at such rate as the Chief Justice may from time to time determine or at such other rate not exceeding the rate aforesaid as the Court determines, such interest to be calculated from the date of judgment until the judgment is satisfied.” (emphasis added). K(1). When is Commencement Date in this case? 38

The learned SAR had exercised her discretion under s 11 CLA and O 42 r 12 RC by imposing interest at the rate of 5% per annum on the Assessed Damages from the date of the High Court’s Decision (29.5.2012) until full payment of the Assessed Damages.

Generally, an appellate court is reluctant to set aside a lower court’s exercise of discretion unless it can be shown that the lower court has exercised the discretion improperly - please see the Federal Court’s judgment delivered by Abdull Hamid Embong FCJ in Dato’ Seri Anwar bin Ibrahim v Public Prosecutor [2010] 2 MLJ 312, at paragraph 48.

I am of the view that in deciding on the Commencement Date, the learned SAR has failed to consider a relevant consideration, namely the Plaintiff’s Delay. If interest on the Assessed Damages runs from the date of the High Court’s Decision, this means that the Plaintiff is allowed to profit unjustly from the Plaintiff’s Delay. It is to be noted that the 1st and 2nd Defendants did not contribute in any manner to the delay in the disposal of the Assessment. Hence, the learned SAR has improperly exercised her discretion regarding the Commencement Date which warrants appellate intervention.

In view of the Plaintiff’s Delay, it is only just that the Commencement Date should be 30.3.2017 (the date of reinstatement of the Assessment).

The High Court has a wide discretion regarding costs of This Appeal and the Assessment. This is clear from O 59 r 2(2) RC which reads as follows: 39 “Subject to the express provisions of any written law and of these Rules, the costs of and incidental to proceedings in the Court, shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid.” (emphasis added).

As the Plaintiff as well as the 1st and 2nd Defendants are only partially successful before the learned SAR and before me, it is only proper that I exercise my discretion pursuant to O 59 r 2(2) RC that there shall be no order of costs for the Assessment before the learned SAR and for This Appeal. M. Outcome of This Appeal

In brief -

the learned SAR should not have admitted the 2 WS as evidence in the Assessment under O 41 r 5(1) RC because -

the 2 Witnesses did not affirm any affidavit regarding the 2 WS;

Dato’ Lim had no personal knowledge of the truth of the contents of the 2 WS;

there was no reason why the 2 Witnesses could not affirm affidavits to be used in the Assessment. Alternatively, the Plaintiff could have applied for the court to issue subpoenas under O 37 r 1(4) RC to compel the 2 Witnesses to testify in the Assessment; and 40

the 1st and 2nd Defendants were irreparably prejudiced by the 2 WS because the 1st and 2nd Defendants could not apply to court for leave to cross-examine the 2 Witnesses who had not affirmed any affidavit in the Assessment;

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;

the Plaintiff’s Loss -

is not too remote and is recoverable from the 1st and 2nd

is “caused” by the Patent Infringement; and

is assessed by using Lost Profit Basis premised on the sales of the Infringing Products. In this regard, the Plaintiff is 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 Plaintiff could not claim for Price Erosion Loss because -

the Plaintiff had not reduced the price of the Patented Product due to the Infringing Products; and

there was no evidence that the Plaintiff intended to increase the price of the Patented Product but could not do so due to the lower price of the Infringing Products; 41

the Plaintiff cannot claim for the Loss of 3 Companies as -

the Plaintiff did not appeal to this court under O 56 r 1(1) RC against the learned SAR’s rejection of the Plaintiff’s claim for the Loss of 3 Companies; and

the 3 Companies have no right to claim for any damages under s 60(1) PA regarding the Patent Infringement;

the Plaintiff was not required to adduce expert evidence in support of the Plaintiff’s Loss because this Assessment concerned box files which did not involve any technical matter beyond the court’s competence; and

in view of the Plaintiff’s Delay, it is only just that the court should exercise its discretion under s 11 CLA and O 42 r 12 RC to order interest at the rate of 5% per annum on the Reassessed Damages to commence from 30.3.2017 (date of reinstatement of the Assessment) until the date of full payment of the Reassessed Damages.

Based on the above evidence and reasons, This Appeal is partially allowed with the following order:

the learned SAR’s order is set aside in its entirety;

the 1st and 2nd Defendants shall pay to the Plaintiff as damages for Patent Infringement in the sum of RM1,558,472.45 (Reassessed Damages); 42

the 1st and 2nd Defendants shall pay to the Plaintiff interest at the rate of 5% per annum on the Reassessed Damages from 30.3.2017 (date of reinstatement of the Assessment) until the date of full payment of the Reassessed Damages; and

no order of costs is made for the Assessment before the learned SAR and for This Appeal. WONG KIAN KHEONG Judge High Court (Commercial Division) Kuala Lumpur DATE: 4 MARCH 2019 Counsel for Plaintiff: Ms. Michelle Loi Choi Yoke & Ms. Elisia Engku Kangon (Messrs Shearn Delamore & Co.) Counsel for Defendants: Mr. Foong Cheng Leong & Ms. Low Li Qun (Messrs Foong Cheng Leong & Co.)