TOWA Corp v ASMPT Singapore Pte Ltd and another appeal [2024] SGCA 52

Sushant Shukla

Case Details

Citation: [2024] SGCA 52
Court: Court of Appeal of the Republic of Singapore
Decision Date: 22 November 2024
Coram: Tay Yong Kwang JCA; Andrew Phang Boon Leong SJ
Case Number: Civil Appeal No 25 of 2024 (CA/CA 25/2024); Civil Appeal No 26 of 2024 (CA/CA 26/2024)
Hearing Date(s): 21 November 2024
Appellants: TOWA Corporation (CA 25); ASMPT Singapore Pte Ltd (CA 26)
Respondents: ASMPT Singapore Pte Ltd (CA 25); TOWA Corporation (CA 26)
Counsel for TOWA Corporation: Low Chai Chong, Long Ai Ming, Foo Maw Jiun, Ng Ah Sock Angie and Chia Jung Yeong Mark (Dentons Rodyk & Davidson LLP)
Counsel for ASMPT Singapore Pte Ltd: Lim Ying Sin Daniel and Lakshmanan s/o Anbarazan (Joyce A. Tan & Partners LLC)
Practice Areas: Damages — Assessment; Intellectual Property; Patent Infringement

The decision of the Court of Appeal in [2024] SGCA 52 serves as a definitive clarification on the methodology for assessing damages in patent infringement cases, specifically regarding the treatment of unclassified corporate costs and the temporal boundaries of pre-judgment interest. The appeals arose from a protracted dispute following the finding that ASMPT Singapore Pte Ltd ("ASMPT") had infringed Singapore Patent No 49740, owned by TOWA Corporation ("TOWA"), which pertains to "YPS" auto mould machines used in semiconductor manufacturing. The core of the appellate dispute centered on two distinct but commercially significant issues: first, whether "general additional costs of sales" that are not specifically attributed to a product line in a company's accounts should be proportionally allocated to the infringing product when calculating lost profits; and second, the appropriate commencement and cessation dates for pre-judgment interest in bifurcated proceedings.

The Court of Appeal’s primary doctrinal contribution in this judgment is the rejection of a purely formalistic accounting approach to "fixed" versus "variable" costs. TOWA had argued that certain unclassified costs were fixed and would not have increased in the "but-for" scenario where TOWA sold additional machines to replace ASMPT's infringing sales. The Court of Appeal disagreed, establishing that where costs are described as applying to a "whole product range" and remain unclassified, the most reasonable inference is that such costs scale with sales volume. This "reasonable inference" test prevents plaintiffs from artificially inflating lost profit claims by ignoring the inevitable overhead creep associated with increased manufacturing and sales activity. The court held that these costs must be proportionally allocated, thereby reducing the net profit margin used to calculate damages.

Regarding pre-judgment interest, the court reinforced the "compensatory principle." It dismissed TOWA’s attempt to vary the interest period and rejected ASMPT’s argument that interest should only run from the date TOWA elected its remedy of damages. By distinguishing the previous High Court decision in Main-Line Corporate Holdings Ltd v United Overseas Bank, the Court of Appeal affirmed that the default position—interest running from the date of the writ—remains the standard in Singapore, regardless of the bifurcated nature of the suit or the timing of the election of remedy. Furthermore, the court clarified that settlement offers do not trigger an early cessation of interest, as the impact of such offers is a matter for costs, not the compensatory award of interest.

The final result saw the Court of Appeal allowing ASMPT’s appeal in part (CA 26) regarding the cost allocation and dismissing TOWA’s appeal (CA 25) in its entirety. This outcome underscores the court's commitment to commercial realism in damages quantification. By awarding $70,000 in costs to ASMPT for both appeals, the court signaled that while patent owners are entitled to be made whole, the quantification of that "wholeness" must account for the full spectrum of business expenses that would have been incurred in the hypothetical non-infringing world.

Timeline of Events

19 April 2013: TOWA Corporation commences Suit No 359 of 2013 against ASMPT Singapore Pte Ltd alleging infringement of Singapore Patent No 49740.
8 August 2018: Following the liability phase of the bifurcated proceedings, TOWA formally elects to claim damages rather than an account of profits.
25 March 2021: A key date in the procedural history of the assessment of damages (AD) proceedings, as identified in the evidence record.
2023: The High Court issues the initial judgment on the assessment of damages in Towa Corp v ASM Technology Singapore Pte Ltd [2023] 5 SLR 870 (the “AD Judgment”).
15 March 2024: The High Court issues a supplemental decision on the assessment of damages in [2024] SGHC 163 (the “Supplemental AD GD”).
21 November 2024: The Court of Appeal hears the cross-appeals CA/CA 25/2024 and CA/CA 26/2024.
22 November 2024: The Court of Appeal delivers its judgment, allowing CA 26 in part and dismissing CA 25.

What Were the Facts of This Case?

The litigation involved TOWA Corporation ("TOWA"), a Japanese company specializing in semiconductor manufacturing equipment, and ASMPT Singapore Pte Ltd ("ASMPT"). The dispute centered on TOWA’s Singapore Patent No 49740, which covers technology utilized in TOWA’s "YPS" auto mould machines. These machines are critical components in the semiconductor assembly process, used for encapsulating electronic components in protective resin. ASMPT was found liable for infringing this patent through the manufacture and sale of its "IDEALmold" machine. The infringing acts included making, disposing of, offering to dispose of, and keeping the IDEALmold machines in Singapore (at [2]).

The proceedings were bifurcated into a liability phase and an assessment of damages ("AD") phase. Once liability was established, TOWA was required to choose between an account of profits (stripping ASMPT of its ill-gotten gains) and damages (compensating TOWA for its own lost profits). On 8 August 2018, TOWA elected to claim damages. The primary objective of the AD phase was to determine the "lost profits" TOWA would have earned in a hypothetical "but-for" world where ASMPT’s infringing IDEALmold machines were not available in the market. This required the court to estimate how many additional YPS machines TOWA would have sold and what the net profit on those sales would have been.

A critical component of this calculation was the determination of the profit margin per YPS machine. To arrive at a net profit figure, the court had to subtract the "incremental costs" TOWA would have incurred to produce and sell those additional machines from the projected revenue. TOWA’s financial records included a category of expenses known as "general additional costs of sales" or "unclassified costs." These costs were not attributed to any specific product line in TOWA's internal accounting but were instead recorded as general overheads for the entire company. ASMPT argued that a portion of these "Contested Unclassified Costs" must be allocated to the YPS machines because, in the "but-for" world, the increased production and sales of YPS machines would have inevitably driven up these general corporate expenses.

TOWA resisted this allocation, relying on the evidence of Mr. Nishizuka, who was the Senior Manager of TOWA’s Finance Department at the relevant time. Mr. Nishizuka testified that these unclassified costs were fixed and would not have increased regardless of whether TOWA sold more YPS machines. He maintained that these costs were independent of the volume of production for the YPS line. The High Court, in the AD Judgment ([2023] 5 SLR 870) and the Supplemental AD GD ([2024] SGHC 163), initially accepted TOWA's position and declined to allocate these costs to the YPS machines. This led to ASMPT's appeal in CA 26, seeking a reduction in the damages award by including these costs in the profit margin calculation.

Parallel to the cost allocation dispute was a disagreement over pre-judgment interest. The High Court had awarded interest at the standard rate of 5.33% per annum. However, the parties contested the period for which this interest should apply. TOWA sought interest from the date of the writ (19 April 2013) until the date of final judgment. ASMPT, conversely, argued for a significantly narrower window. ASMPT contended that interest should only begin on 8 August 2018 (the date of TOWA's election) and should cease 14 days after ASMPT made a settlement offer that TOWA rejected. ASMPT claimed this offer was more favorable than the eventual judgment, and therefore TOWA should not be entitled to interest for the period following the "unreasonable" rejection of the offer. These issues formed the basis of TOWA's appeal in CA 25 and ASMPT's cross-appeal on interest.

What Were the Key Legal Issues?

The Court of Appeal was required to resolve three primary legal issues, each carrying significant weight for the practice of assessing damages in intellectual property litigation:

The Allocation of Unclassified Costs: The court had to determine whether "general additional costs of sales" that are unclassified in a company's financial records should be proportionally allocated to a specific product line when calculating lost profits for patent infringement. This involved a choice between accepting a witness's characterization of costs as "fixed" versus applying a "reasonable inference" that general overheads scale with sales volume.
The Commencement Date for Pre-judgment Interest: The issue was whether, in a bifurcated suit where the plaintiff elects damages years after the writ, interest should run from the date of the writ (the default position) or from the date of the election. This required an interpretation of the "compensatory principle" and a determination of whether the Main-Line decision established a new rule for patent cases.
The Cessation Date for Pre-judgment Interest and the Effect of Settlement Offers: The court had to decide if a defendant's settlement offer should truncate the period for which pre-judgment interest is awarded. This involved distinguishing the role of settlement offers in the context of costs (under the Rules of Court) from their role in the context of compensatory interest.

These issues required the court to balance the need for full compensation for the patentee against the requirement for evidentiary precision and the prevention of over-compensation through the exclusion of legitimate business overheads.

How Did the Court Analyse the Issues?

1. The Allocation of Contested Unclassified Costs

The Court of Appeal’s analysis of the "Contested Unclassified Costs" turned on the logical and commercial implications of how TOWA categorized its own expenses. ASMPT’s appeal in CA 26 argued that the High Court erred by treating these costs as "fixed" simply because they were not explicitly tied to the YPS product line in TOWA's accounts. The Court of Appeal noted that these costs were described in TOWA’s own documents as "unclassified" and as applying to TOWA’s "whole product range."

The court scrutinized the testimony of Mr. Nishizuka, TOWA’s Finance Manager. While Mr. Nishizuka asserted that these costs would not have increased with additional YPS sales, the court found this assertion to be at odds with the nature of the costs themselves. The court reasoned that "unclassified" does not mean "fixed"; rather, it means the costs are general overheads that support the entire manufacturing and sales infrastructure of the company. As the company expands its operations to produce and sell more units of a complex machine like the YPS, its general administrative, logistical, and support costs will naturally scale. The court held at [11]:

"the most reasonable inference to draw is that such unclassified costs, including the Contested Unclassified Costs, would increase with more sales of the YPS machines."

The court emphasized that in the "but-for" world, TOWA would have been a larger operation in terms of YPS sales. It is a matter of common commercial sense that a larger operation incurs higher general costs. TOWA’s failure to provide a granular breakdown that could prove these costs were truly independent of sales volume meant that the "reasonable inference" of variability must prevail. Consequently, the court ordered that these costs be allocated to the YPS machines in the same proportion that the YPS machines' sales bore to TOWA's total sales. This proportional allocation is a standard accounting method used when direct attribution is impossible, and the court found it to be the most equitable way to ensure the lost profit calculation was realistic.

2. Pre-judgment Interest: The Commencement Date

In CA 25, TOWA sought to challenge the interest award, while ASMPT cross-appealed to delay the start of the interest period to the date of TOWA's election of damages (8 August 2018). ASMPT relied on Main-Line Corporate Holdings Ltd v United Overseas Bank [2017] 5 SLR 175 (“Main-Line (Interest & Costs)”) to argue that in bifurcated patent cases, interest should only run from the date the plaintiff makes its election.

The Court of Appeal rejected ASMPT’s interpretation of Main-Line. It clarified that Main-Line did not establish a rigid rule of law. Instead, the overarching principle is the "compensatory principle": interest is intended to compensate the plaintiff for being deprived of the use of money that was rightfully theirs. In a patent infringement case, the loss occurs at the moment the infringing sale is made by the defendant, as that is the moment the plaintiff is deprived of its profit. Therefore, the plaintiff is "out of pocket" from the date of infringement.

The court held that the date of the writ (19 April 2013) is already a conservative starting point, as it often falls well after the initial acts of infringement. The fact that a suit is bifurcated or that an election is made later does not change the fact that the underlying loss occurred much earlier. The court noted that the election of remedy is a procedural step that does not alter the date on which the substantive loss was sustained. Thus, the High Court’s decision to start interest from the date of the writ was affirmed as being consistent with the compensatory nature of pre-judgment interest.

3. Pre-judgment Interest: The Cessation Date and Settlement Offers

ASMPT further argued that interest should cease 14 days after they made a settlement offer to TOWA, on the basis that TOWA’s rejection of the offer was "unreasonable." They contended that because their offer was purportedly higher than the final damages award, TOWA should not be rewarded with interest for the period during which they "unnecessarily" prolonged the litigation.

The Court of Appeal rejected this argument, drawing a sharp distinction between the law of costs and the law of interest. The court relied on the principle established in Grains and Industrial Products Trading Pte Ltd v Bank of India and another [2016] 3 SLR 1308 at [137], which states that pre-judgment interest is not a penalty on the defendant but compensation for the plaintiff. To stop interest because of a settlement offer would be to use interest as a tool for procedural discipline, which is the function of costs orders under the Rules of Court.

The court observed that at the time ASMPT made its offer, the quantum of damages was still highly uncertain and subject to complex accounting disputes (as evidenced by the appeals themselves). Therefore, it could not be said that TOWA’s rejection was so "unreasonable" as to justify depriving them of the compensatory interest they were otherwise entitled to. The court affirmed that the impact of settlement offers should be confined to the assessment of costs, maintaining the integrity of the compensatory principle for interest awards.

What Was the Outcome?

The Court of Appeal delivered a split decision that largely favored ASMPT on the substantive issue of damages calculation while maintaining the status quo on the principles of interest. The court's formal disposition was stated at [22]:

"we allow CA 26 in part and dismiss CA 25."

The specific orders and their implications are as follows:

CA 26 (ASMPT's Appeal): Allowed in part. The court ordered that the "Contested Unclassified Costs" (the general additional costs of sales) must be proportionally allocated to the YPS machines when calculating TOWA's lost profits. This resulted in a downward adjustment of the damages award, as the net profit margin per machine was reduced by the inclusion of these previously excluded overheads.
CA 25 (TOWA's Appeal): Dismissed in its entirety. TOWA’s challenges to the interest award were rejected. The court upheld the High Court's decision to award pre-judgment interest at 5.33% per annum starting from the date of the writ (19 April 2013).
ASMPT's Cross-Appeal on Interest: Dismissed. The court rejected ASMPT's attempts to delay the commencement of interest to the date of election or to truncate the interest period based on their settlement offer.
Costs: The court awarded costs to ASMPT in the sum of $70,000 (all-in) in relation to both appeals (at [23]). This costs award reflects ASMPT's success in CA 26 and the dismissal of TOWA's appeal in CA 25.

The outcome reinforces the necessity for plaintiffs in patent infringement cases to provide rigorous, granular evidence if they wish to exclude general corporate costs from a lost-profits analysis. It also provides certainty that the "date of writ" remains the robust default for the commencement of pre-judgment interest in Singapore, providing a predictable framework for both plaintiffs and defendants in complex, bifurcated litigation.

Why Does This Case Matter?

The judgment in [2024] SGCA 52 is a significant milestone in Singapore’s intellectual property jurisprudence, particularly for the assessment of damages. Its importance lies in three main areas: the evidentiary standard for cost allocation, the clarification of interest principles in bifurcated suits, and the procedural distinction between interest and costs.

First, the case establishes a "commercial realism" standard for the allocation of corporate overheads. In many patent cases, the plaintiff is a large multinational with complex accounting structures. This judgment makes it clear that the court will not blindly accept a witness's characterization of costs as "fixed" if those costs are described in the company's own records as general or unclassified. By invoking the "reasonable inference" that general costs scale with sales volume, the Court of Appeal has placed a higher evidentiary burden on plaintiffs. Practitioners must now ensure that forensic accounting evidence is not just based on internal labels but on a demonstrable lack of correlation between the specific cost and production volume. This prevents patentees from claiming a "gross" profit margin that ignores the reality of business expansion.

Second, the decision provides much-needed clarity on the commencement of pre-judgment interest in bifurcated proceedings. There had been some uncertainty following the Main-Line decision as to whether patent cases required a departure from the "date of writ" rule. The Court of Appeal has now firmly stated that the compensatory principle is the North Star. Because the loss is sustained at the time of infringement, the date of the writ is the appropriate (and conservative) starting point. This provides a clear, predictable rule that simplifies the quantification process and ensures that patentees are fairly compensated for the time-value of their lost profits.

Third, the court’s refusal to allow settlement offers to truncate the interest period preserves the conceptual distinction between interest (compensation for the loss) and costs (incentives for settlement). By holding that settlement offers are a matter for costs, the court has protected the compensatory nature of interest from being used as a tactical tool to pressure plaintiffs into accepting uncertain settlements. This maintains a fair balance: a defendant who makes a good offer is rewarded through the costs regime, but the plaintiff is not deprived of the interest that represents the actual loss of use of their money.

Finally, the case highlights the risks of "all-or-nothing" evidentiary positions in damages assessments. TOWA’s reliance on the testimony that unclassified costs were entirely fixed was ultimately its undoing on that issue. For practitioners, this underscores the value of alternative arguments and the need for proportional allocation models when direct attribution is contested. The $70,000 costs award against TOWA serves as a reminder of the financial consequences of failing to sustain a complex damages claim on appeal.

Practice Pointers

Scrutinize "Unclassified" Costs: When calculating lost profits, do not assume that costs labeled as "general," "unclassified," or "overhead" in a client's accounts will be treated as fixed. The court will likely apply a "reasonable inference" that these costs scale with sales volume.
Forensic Accounting Granularity: To successfully argue that a cost is "fixed," practitioners must provide granular evidence showing that the cost did not fluctuate with production levels in the years surrounding the infringement. Simple witness testimony from a finance manager may be insufficient if contradicted by the nature of the cost.
Proportional Allocation as a Fallback: If direct attribution of costs to an infringing product line is impossible, propose a proportional allocation model (e.g., based on the ratio of product sales to total sales) as a commercially realistic alternative to total exclusion.
Interest Starts at the Writ: In bifurcated patent cases, advise clients that the default commencement date for pre-judgment interest is the date of the writ. The date of election of remedy is generally irrelevant to the compensatory purpose of interest.
Settlement Offers and Interest: Note that a settlement offer, even if more favorable than the final judgment, will not typically stop the accrual of pre-judgment interest. Its impact is confined to the costs award under the Rules of Court.
Distinguish Main-Line: Be prepared to distinguish Main-Line (Interest & Costs) by emphasizing that it does not set a rigid rule for the commencement of interest in all bifurcated IP cases; the compensatory principle remains the primary consideration.
Evidence of "But-For" Expansion: When constructing the "but-for" world, account for the fact that a larger hypothetical operation would likely incur higher administrative and logistical support costs, even if those costs are not directly "variable" in a strict accounting sense.

Subsequent Treatment

As a 2024 decision from the Court of Appeal, [2024] SGCA 52 stands as the leading authority on the allocation of unclassified costs in patent damages and the application of the compensatory principle to pre-judgment interest in bifurcated suits. It effectively limits the scope of the Main-Line decision regarding the commencement of interest and reinforces the standard 5.33% rate from the date of the writ as the robust default in Singapore. Its "reasonable inference" test for cost variability is expected to be applied in future commercial and IP disputes involving complex corporate accounting.

Legislation Referenced

Patents Act: The underlying statute for the infringement claim involving Singapore Patent No 49740.
Rules of Court: Referenced in the context of the impact of settlement offers on costs awards.