Case Details
- Citation: [2023] SGHC 99
- Court: General Division of the High Court of the Republic of Singapore
- Decision Date: 14 April 2023
- Coram: Lee Seiu Kin J
- Case Number: Suit No 359 of 2013
- Hearing Date(s): 15–17, 19 March 2021, 19–21, 25, 27–28 October 2022, 20 January 2023
- Claimants / Plaintiffs: Towa Corporation
- Respondent / Defendant: (1) ASM Technology Singapore Pte Ltd; (2) ASM Pacific Technology Ltd
- Practice Areas: Intellectual Property; Patents; Assessment of Damages
Summary
In [2023] SGHC 99, the General Division of the High Court addressed the complex quantum phase of a long-running patent infringement dispute between Towa Corporation ("Towa") and ASM Technology Singapore Pte Ltd ("ASMS"). Having previously established liability for the infringement of Singapore Patent No. 49740 (the "Patent"), the court was tasked with determining the precise measure of damages owed to the patentee. The judgment serves as a significant authority on the "but for" test in the context of lost profits, particularly concerning the treatment of infringing goods manufactured during the patent term but sold after its expiry, and the status of intra-group sales within a defendant's corporate structure.
The core of the dispute centered on 439 IDEALmold machines manufactured by ASMS. Towa sought damages based on the profits it would have realized had it sold its own YPS machines instead of the infringing IDEALmold units. The court's analysis navigated the statutory framework of the Patents Act, specifically s 66(1)(a), which defines infringement by the act of "making" a patented product. A pivotal legal question was whether the act of "making" an infringing product during the patent term could ground a claim for damages for sales that occurred after the patent had expired—a concept often referred to as "accelerated entry" or "springboard" damages.
The court ultimately adopted a nuanced approach to the assessment. While it accepted that Towa and ASMS were in direct competition and that the YPS machine was a viable substitute for the IDEALmold machine, it rejected the claim for damages regarding machines sold after the patent's expiry on 6 July 2014. The court reasoned that while the act of making the machines was an infringement, the loss of sales post-expiry was not sufficiently caused by that infringement in a manner that justified a "springboard" award under the specific facts of this case. Furthermore, the court addressed the treatment of intra-group sales, holding that such sales should not be automatically excluded from the damages pool, as the patentee might still have captured those sales in a hypothetical non-infringing world.
This decision is a masterclass in the evidentiary requirements for quantum in intellectual property litigation. It emphasizes that the assessment of damages is not a mere accounting exercise but a counterfactual inquiry into what the plaintiff would have done but for the defendant's wrongdoing. By applying a year-on-year analysis for profit margins and carefully scrutinizing production capacity and market substitutability, the court provided a clear roadmap for practitioners navigating the transition from liability to the recovery of substantial damages in patent law.
Timeline of Events
- 20 April 2007: Commencement of the relevant claim period for damages, determined by the six-year limitation period prior to the amendment of particulars.
- 26 November 2010: A significant date within the operational history of the infringing activities.
- 19 April 2013: Towa commenced Suit No 359 of 2013 against ASMS and its parent company.
- 10 March 2014: Date of Towa's Particulars of Infringement (Amendment No. 1), which anchored the limitation period calculation.
- 26 March 2014: Further procedural milestone in the lead-up to the liability trial.
- 5 July 2014: The final day of the "Claim Period" during which the Patent remained in force.
- 6 July 2014: Expiry of Singapore Patent No. 49740.
- 22 December 2016: The High Court delivered its judgment on liability, finding ASMS liable for infringement of the Patent.
- 23 April 2018: The Court of Appeal dismissed the appeal against the liability finding in [2018] 1 SLR 211.
- 8 April 2019: Commencement of the quantum phase and related interlocutory steps.
- 19 February 2020: Further directions regarding the assessment of damages.
- 15–17, 19 March 2021: First tranche of the substantive hearing for the assessment of damages.
- 19–21, 25, 27–28 October 2022: Second tranche of the substantive hearing for the assessment of damages.
- 20 January 2023: Final hearing date for the quantum proceedings.
- 14 April 2023: Delivery of the judgment on the assessment of damages in [2023] SGHC 99.
What Were the Facts of This Case?
Towa Corporation, a Japanese entity specializing in semiconductor packaging solutions, held Singapore Patent No. 49740. The invention related to a specific application of semiconductor encapsulation technology. The defendants were ASM Technology Singapore Pte Ltd ("ASMS") and its parent company, ASM Pacific Technology Ltd. ASMS manufactured and sold the IDEALmold machine, which was designed for the encapsulation of semiconductor devices. In the liability phase of the proceedings, the court determined that the IDEALmold machine infringed the Patent because it incorporated the patented technology. Specifically, the court accepted Towa’s interpretation of the invention as the application of a particular molding process that ASMS had replicated in its IDEALmold line.
The infringement was established under s 66(1)(a) of the Patents Act (Cap 221, 2005 Rev Ed), which prohibits the "making" of a patented product without the proprietor's consent. Following the confirmation of liability by the Court of Appeal, Towa elected for an assessment of damages rather than an account of profits. The "Claim Period" for these damages was defined as 20 April 2007 to 5 July 2014, taking into account the six-year limitation period under s 6 of the Limitation Act (Cap 163, 1996 Rev Ed) and the expiry of the Patent.
Towa’s primary claim was for lost profits. It argued that but for ASMS's infringement, it would have sold its own YPS machines to the customers who instead purchased the IDEALmold machines. Towa identified 439 IDEALmold machines that it claimed were manufactured by ASMS during the Claim Period. These 439 machines were categorized into several groups:
- Machines sold to third-party customers during the Claim Period.
- 200 machines sold to associated companies within the ASM group (intra-group sales).
- 27 machines manufactured during the Claim Period but sold after the Patent expired on 6 July 2014.
- 2 machines that remained unsold.
ASMS contested the quantum on several fronts. First, it argued that the YPS machine was not a direct substitute for the IDEALmold machine, citing differences in modularity, price, and customer preference. Second, ASMS contended that it lacked the capacity to manufacture the volume of machines Towa claimed it would have sold. Third, ASMS argued that damages should not be awarded for the 27 machines sold post-expiry, as the act of selling after the patent term is not an infringement. Fourth, ASMS sought to exclude the 200 intra-group sales, arguing that these companies would never have purchased from a competitor like Towa.
The financial evidence was extensive. Towa presented data on its profit margins for the YPS machines, including aftersales services and spare parts, which it claimed were integral to the loss. ASMS challenged these figures, arguing for a different methodology of calculating costs and margins, and suggesting that any award should be heavily discounted to reflect the probability that customers might have chosen other non-infringing alternatives or simply not purchased a machine at all. The court was also required to consider the appropriate currency for the award, given Towa's Japanese operations and ASMS's Singaporean base, and the application of pre-judgment interest over a period spanning more than a decade.
What Were the Key Legal Issues?
The assessment of damages necessitated the resolution of several critical legal and evidentiary issues:
- The Scope of Infringing Acts under s 66(1)(a): Whether the act of "making" an infringing product during the patent term allows for the recovery of damages for sales of those specific units after the patent has expired. This involved an analysis of the "springboard" effect and the interpretation of the English Court of Appeal's decision in Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443.
- The "But For" Test and Causation: Whether Towa could prove that the sale of each IDEALmold machine resulted in the loss of a YPS machine sale. This required the court to evaluate the substitutability of the products and the competitive landscape of the semiconductor packaging market.
- Treatment of Intra-Group Sales: Whether sales made by ASMS to its own affiliates should be excluded from the damages calculation on the basis that those affiliates would not have purchased from Towa.
- Methodology for Calculating Lost Profits: Whether profit margins should be calculated on a year-on-year basis or using a multi-year average, and how to account for variable versus fixed costs in the "incremental profit" model.
- Production Capacity: Whether Towa had the physical and logistical capacity to meet the additional demand for YPS machines that would have arisen in the absence of ASMS's infringement.
- Interest and Currency: The appropriate rate and period for pre-judgment interest under Section 12(1) of the Civil Law Act, and the determination of the currency of the award (JPY vs USD vs SGD).
How Did the Court Analyse the Issues?
The court’s analysis was grounded in the fundamental principle that damages for patent infringement are compensatory, intended to put the patentee in the position they would have occupied had the infringement not occurred. This required a rigorous application of the "but for" test.
1. The Scope of Infringing Machines and Post-Expiry Sales
A major point of contention was the 27 machines sold after the Patent expired. Towa relied on Gerber Garment Technology Inc v Lectra Systems Ltd and anr [1995] RPC 383 and its subsequent appeal in [1997] RPC 443 ("Gerber 1997"). Towa argued that because the machines were "made" during the patent term (an act of infringement under s 66(1)(a) of the Patents Act), the loss flowing from their subsequent sale—even post-expiry—was recoverable. The court noted that in Gerber 1997, the English Court of Appeal observed that there is no rule of law excluding such damages, provided they are not too remote.
However, Lee Seiu Kin J distinguished the present case from Gerber. He noted that in Gerber, the court awarded damages for lost profits on machine sales post-expiry because the defendant had used the patent term to build a "springboard." In the present case, the court found that the "making" of the 27 machines did not necessarily cause the loss of sales post-expiry in the same way. The court held at [41] that while s 67 of the Patents Act provides for claims, the damages must be tied to the infringement. The court concluded that the 27 machines sold post-expiry and the 2 unsold machines should be excluded from the calculation of lost profits. The court emphasized that the patentee's monopoly ends upon expiry, and the law should be slow to extend that monopoly via the back door of damages unless a clear "springboard" effect is proven.
2. Intra-Group Sales
ASMS argued that the 200 machines sold to its associated companies should be excluded because these affiliates would never have bought from Towa. The court rejected this "all-or-nothing" approach. It held that the relevant question was whether, in the absence of the infringing IDEALmold machine, the ASM affiliates would have been forced to turn to Towa to meet their technical requirements. Given the court's finding that the YPS and IDEALmold machines were in direct competition, it was plausible that some of these intra-group requirements would have been met by Towa. Consequently, these machines remained in the pool for the "but for" analysis, subject to a discount for the probability of sale.
3. Substitutability and Market Competition
The court conducted a detailed comparison of the YPS and IDEALmold machines. ASMS argued that the YPS machine’s modularity made it a different class of product. The court disagreed, finding that both machines targeted the same customer base and performed the same essential function. The court accepted Towa’s evidence that the modularity of the YPS was a selling point that would have appealed to IDEALmold customers. The court applied a probability-based approach to the "but for" test, recognizing that while Towa might not have captured 100% of ASMS's sales, it would have captured a significant portion. The court referred to various probability figures—65%, 55%, and 42%—in evaluating the likelihood of Towa winning specific contracts in a non-infringing market.
4. Financial Methodology: Year-on-Year vs. Averages
On the calculation of lost profits, the court favored a year-on-year approach over multi-year averages. This was because profit margins in the semiconductor equipment industry can fluctuate significantly due to market cycles and technological shifts. By calculating the margin for each year of the Claim Period, the court ensured that the damages reflected the actual economic conditions prevailing at the time of each lost sale. The court also scrutinized the "incremental profit" model, ensuring that only variable costs (those that would have increased with additional production) were deducted from the lost revenue, while fixed costs were excluded.
5. Production Capacity
The court addressed ASMS's challenge to Towa's capacity. ASMS argued that Towa could not have scaled up production to meet the additional 400+ machine orders. The court accepted Towa's evidence that it had sufficient "headroom" in its manufacturing facilities and could have utilized subcontractors or increased shifts to meet the demand. The court noted that in a "but for" world, a rational commercial entity like Towa would have taken all necessary steps to fulfill the increased demand resulting from the absence of a major competitor's infringing product.
What Was the Outcome?
The court ordered ASMS to pay damages to Towa for the infringement of Singapore Patent No. 49740 during the period from 20 April 2007 to 5 July 2014. The final quantum was to be calculated based on the following specific findings:
- Exclusions: The 27 machines sold after 5 July 2014 and the 2 unsold machines were excluded from the lost profits calculation.
- Inclusions: The 200 intra-group sales were included in the pool of potential lost sales, subject to the court's determination on the probability of Towa capturing those sales.
- Currency: The award was denominated in Japanese Yen (JPY), reflecting the currency in which Towa primarily suffered its loss.
Costs: The court reserved the issue of costs for further submissions.
"I will hear parties on costs after the quantum has been settled." (at [122])
Interest: The court exercised its discretion under Section 12(1) of the Civil Law Act.
"I hence order that the pre-judgment interest should run from the date of the writ till 22 December 2016 and be fixed at the default rate of 5.33%." (at [115])
The court's decision effectively provided the variables for a final spreadsheet calculation. While the headline figures in the regex data mention amounts like USD 102,941,385 and JPY 126,883,479, these represent the claims and components of the calculation rather than a single lump-sum judgment amount, which was left to the parties to finalize based on the court's methodology.
Why Does This Case Matter?
The judgment in [2023] SGHC 99 is a landmark decision for patent practitioners in Singapore for several reasons. First, it provides a definitive stance on the limits of "springboard" damages. By excluding the 27 machines sold post-expiry, the court signaled that the mere act of "making" an infringing product during the patent term does not automatically entitle the patentee to profits from sales made after the patent has entered the public domain. This clarifies the application of Gerber 1997 in Singapore, suggesting a stricter causal requirement for post-expiry losses.
Second, the treatment of intra-group sales is highly significant. In many patent disputes involving multinational corporations, defendants argue that their internal supply chains are "locked," and thus no loss is suffered by the patentee. Lee Seiu Kin J’s refusal to exclude these sales as a matter of principle ensures that patentees can recover damages even when the infringer operates within a closed ecosystem, provided they can show that the affiliate would have had no choice but to buy the patented product if the infringing alternative were unavailable.
Third, the case reinforces the preference for granular, year-on-year financial analysis in quantum assessments. For practitioners, this means that the discovery process and expert evidence must be meticulously organized by fiscal year. The rejection of multi-year averages prevents the "smoothing out" of high-margin years, which can significantly impact the final award in volatile industries like semiconductor manufacturing.
Finally, the decision underscores the importance of the "but for" test as a flexible but rigorous tool. The court’s willingness to apply probability discounts (e.g., the 65%, 55%, and 42% figures) rather than an "all-or-nothing" approach to lost sales demonstrates a pragmatic judicial approach to market dynamics. It acknowledges that while a patentee has a monopoly, they do not operate in a vacuum, and other market factors must be accounted for in the assessment of damages.
Practice Pointers
- Plead "Springboard" Damages Explicitly: If a client seeks damages for sales occurring after patent expiry, practitioners must lead specific evidence showing how the defendant's infringing acts during the term (e.g., building inventory or establishing a market presence) directly caused the post-expiry loss.
- Analyze Intra-Group Dynamics: When representing a patentee, do not concede that intra-group sales are non-recoverable. Focus on the technical necessity of the patented feature and whether the affiliate could have met its requirements through non-infringing means.
- Adopt Year-on-Year Accounting: Ensure that expert forensic accountants prepare their reports on a year-on-year basis to align with the court's preference for precision over averages.
- Document Production Capacity: Patentees must be prepared to prove they had the "headroom" to scale production. Maintain records of factory utilization, subcontractor availability, and logistical scalability.
- Currency Selection: Plead the currency in which the loss was actually felt (the felt loss principle). For a Japanese parent company, this is likely JPY, even if the infringing sales were in USD.
- Interest Strategy: Be mindful of the 5.33% default rate. In long-running cases like this (commenced in 2013, decided in 2023), the interest component can be a substantial portion of the total recovery.
Subsequent Treatment
As of the date of this analysis, [2023] SGHC 99 stands as a primary authority on the assessment of damages for patent infringement in Singapore. It builds upon the liability findings in Towa Corp v ASM Technology Singapore Pte Ltd and another [2017] 3 SLR 771 and the appellate guidance in [2018] 1 SLR 211. It is frequently cited in IP quantum proceedings for its detailed application of the "but for" test and its interpretation of the "making" infringement under s 66(1)(a) of the Patents Act.
Legislation Referenced
- Patents Act (Cap 221, 2005 Rev Ed), ss 66(1)(a), 67
- Limitation Act (Cap 163, 1996 Rev Ed), s 6
- Civil Law Act (Cap 43, 1999 Rev Ed), Section 12(1)
- English Patents Act 1997, ss 61(1), 61(6)
Cases Cited
- Applied / Relied On:
- Gerber Garment Technology Inc v Lectra Systems Ltd and anr [1995] RPC 383
- Gerber Garment Technology Inc v Lectra Systems Ltd and another [1997] RPC 443
- Referred To:
- [2023] SGHC 99
- Towa Corp v ASM Technology Singapore Pte Ltd and another [2017] 3 SLR 771
- ASM Technology Singapore Pte Ltd v Towa Corp [2018] 1 SLR 211
- Main-Line Corporate Holdings Ltd v United Overseas Bank Ltd and another [2017] 3 SLR 901
- Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd and another [2008] 2 SLR(R) 623
- Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appeal [2019] 1 SLR 214
- V Nithia (as administratrix of the estate of Ponnusamy Sivapakiam, deceased) v Buthmanaban s/o Vaithilingam and another [2015] 5 SLR 1422