The Full Court of the Federal Court of Australia
reversed a decision awarding substantial damages for an unjustified
threat in long-running litigation:
Australian Mud Company Pty Ltd v Coretell Pty Ltd  FCAFC
44 (17 March 2017). The primary judge had held that the
respondents (Coretell) had not infringed the patent of Australian
Mud Company (AMC) and therefore Coretell was awarded substantial
damages ($1,506,859) in respect of the cross-claim for unjustified
threats and lost revenues from consequent non-supply of its
allegedly infringing Camteq tool. However, the Full Court held that
the primary judge failed to determine the key question of causation
in accordance to section 128(1)(c) of the Patents Act 1990
AMC appealed the decision on the basis that evidence suggested
that at the time the threats were made, the Camteq tool was still
being developed and tested (meaning it was not ready for commercial
supply) and that problems with the Camteq tool ultimately led
Coretell to develop and market a different tool and to abandon
further development of the Camteq tool. Accordingly, AMC submitted
that Coretell did not sustain any lost sales caused by the
The Full Court confirmed that in hypothesising what would have
happened but for the threats, the Court is not entitled to engage
in estimation, speculation and guesswork. Causation must be
determined as a question of fact on the balance of probabilities.
Further, the Full Court disagreed with the primary judge in stating
that the difference between sales lost as a result of the threats
and sales lost as a result of the proceedings is
'semantical'. The Full Court confirmed that only sales lost
as a result of a threat are those that inflict damages encompassed
by section 128.
The Full Court accepted that a logical problem with the primary
judge's reasoning was that there was no evidence to support a
finding that development of the Camteq tool ceased after the threat
letter. The evidence only suggested that marketing and hiring
ceased. Moreover, at the time the threats were made, the evidence
also demonstrated that Coretell was working hard to perfect the
tools. First, this suggests that the tools were still in the
development stage demonstrating that Coretell did not suffer any
loss of revenue as they did not have a tool ready for commercial
supply. Secondly, the evidence demonstrates that Coretell were not
impeded by the threat letters suggesting that any damage suffered
was not caused by the threat letters. Further, the conclusion at
trial that the Camteq tool would have been ready for commercial
supply within six months of the first threat was "glaringly
improbable" and "contrary to compelling
The Full Court therefore held that the only conclusion available
is that what occurred would have occurred in any event. The appeal
was allowed and Coretell ordered to pay AMC's costs.
This decision provides useful clarification and guidance
regarding what an alleged infringer of a patent (or, likely by
extension, copyright or a registered trade mark) must establish to
receive a damages award in a claim for unjustified or groundless
threats of infringement proceedings. In particular, the bar for
causation between the threat (as distinct from any subsequent
proceedings commenced) and the loss or harm has been set higher by
the Full Court than by the primary judge, such that it must be
clear that there is no other plausible explanation for sales or
profits of products or services not being made following the threat
and, effectively, before proceedings were subsequently commenced.
It may practically be hard to show substantial damage as a result
of a threat where actual proceedings for infringement follow soon
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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leading Intellectual Property firms in 2015.
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