Damages for design
infringement – an exercise
in guesswork?
Inspire September 2018
The two key remedies
sought by intellectual
property owners in
infringement cases are
an injunction to stop
the infringing conduct
and compensation in
the form of damages or
an account of profits.

09 Typically, the Court will determine
the question of infringement
separately and prior to considering
what, if any, compensation should
be awarded. In many instances the
issue of compensation is resolved
between the parties without the
need for judgement. However,
this was not the case in the long
running design infringement
dispute between Gram Engineering
and Bluescope Steel. The recent
decision of the Federal Court 1
provides a useful reminder of the
principles to be applied in assessing
damages for IP infringement.

Gram elected to calculate its
compensation by reference to
the damage caused by the sale of
Bluescope’s infringing Smartascreen
fencing panel. Although sales
of the Smartascreen product
had commenced in 2002, Gram
did not commence proceedings
until 2011 and so the six year
limitation period meant that no
claim could be made in respect of
conduct occurring before 2005.

Gram sought to calculate its damage
on the basis that its business had
grown rapidly up until 2002 when
Gram Engineering Pty Ltd v Bluescope
Steel Ltd [2018] FCA 539
1
the Smartascreen product entered
the market and thereafter suffered
a decline in sales. Gram claimed
that but for the infringing conduct,
its business would have continued
to grow as it had previously. The
Court considered this approach
to be problematic for a number of
reasons including that it was based
on Gram’s total sales rather than
sales of Gram’s products which
competed with Smartascreen.

This [case] highlights
the importance of
maintaining good
records relating to
any loss suffered
as a result of IP
infringement. Further, it took no account of the
actual sales of Smartascreen made
by Bluescope or of other changes in
the market during the infringement
period including the introduction
of other competing products.

Bluescope contended that damages
should be calculated on the basis
of the lost sales to Gram being
a percentage of its total sales
of Smartascreen. It argued that
because Gram had not provided any
evidence that sales of Smartascreen
represented lost sales to it and
that its own evidence indicated
that Gram was unlikely to have
made such sales, the percentage
should be low in the order of 5%.

In assessing damages, the Court
noted the general proposition that
speculation and guesswork may
be required and are permissible.

Once some level of loss was
proven, doubts should be resolved
against the infringing party and
damages assessed with a ‘liberal
hand’. While accepting that
damages should be calculated
as a percentage of Bluescope’s
sales, the Court considered that
5% was too low. The Court inferred
that Smartascreen, which was
found to be an obvious imitation
of Gram’s registered design, was
intended by Bluescope to be directly
substitutable for Gram’s products.

Gram’s declining sales after 2002
was a strong indicator that this
intention was in fact achieved.

Bluescope’s evidence that its
customers would not have
purchased Gram’s products was
largely discounted because those
customers were resellers rather
than end users. If the Smartascreen
product had not been available,
demand for Gram’s products via
its own resellers would have been
higher, leading to greater sales for
Gram. Bluescope’s resellers would
still have been in competition with
Gram’s, but would have done so
without the benefit of Smartascreen.

While the Court took account of
other market factors including the
introduction of third party competing



Inspire September 2018
products, it also noted that Gram’s
sales began declining from 2002,
prior to those products coming
onto the market. Ultimately the
Court found that damages should
be assessed based on Gram having
lost sales volume in an amount
equal to 25% of Bluescope’s actual
sales volume of the infringing
Smartascreen product as well as
an equivalent proportion of sales of
associated parts and accessories
sold along with the infringing
goods. This equated to an amount
in excess of AUD2 million with a
further amount in excess of AUD2
million awarded in interest.

Although the damages awarded to
Gram were significant, the evidence
it put forward to substantiate its
loss was criticised as being less
helpful than it might have been.

This may have been because it
simply did not have sufficient
proof of the damages it believed
it had suffered. Although rarely
required in Court, this highlights
the importance of maintaining good
records relating to any loss suffered
as a result of IP infringement.

10 Adrian Crooks, Partner
BEng(Civil)(Hons) LLB LLM FIPTA
adrian.crooks@pof.com.au