One to One Assumption and Discounts
120 Reflex's business model was to manufacture a fleet of electronic core orientation tools which it hired or rented out to customers in Australia. It made profits on those transactions. Globaltech's business model was different. It manufactured the infringing tools and sold them (at cost according to Mr Hejleh) to BLYA. It was BLYA which then assembled a fleet of tools and made those tools available to be hired or rented out in Australia. Reflex seeks to use BLYA's hiring out or rental figures to establish its loss of hiring or rental opportunities. There is nothing inherently flawed in approaching the matter in that way.
121 The experts agreed as to the appropriate general methodology for the determination of Reflex's loss of profits as a result of Globaltech's infringements and that was the identification and then comparison of actual cashflows to Reflex and the "but-for" cashflows. The but-for cashflows involve an identification of the position Reflex would have been in had the infringements not occurred and the cashflows which would have resulted.
122 The starting point in the analysis is the identification of the relevant principles in circumstances where the Court is dealing with a but-for counterfactual. I do not think that the parties were in dispute about the relevant principles, as distinct from their application to the facts of this case. Reflex submits that the one to one assumption is justified on the facts of the case, whereas Globaltech submits that absent a practical certainty (which is not shown here), there must always be discounts for contingencies and the uncertainties.
123 The matter which is the subject of the Court's consideration is a state of affairs which is a hypothetical or a counterfactual. It is not a historical fact. The law takes a different approach in the case of a hypothetical or a counterfactual. The distinction was identified by Brennan J (as his Honour then was) and Dawson J in Malec v JC Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 in the following passage (at 639-640):
The fact that the plaintiff did not work is a matter of history, and facts of that kind are ascertained for the purposes of civil litigation on the balance of probabilities: if the court attains the required degree of satisfaction as to the occurrence of an historical fact, that fact is accepted as having occurred. By contrast, earning capacity can be assessed only upon the hypothesis that the plaintiff had not been tortiously injured: what would he have been able to earn if he had not been tortiously injured? To answer that question, the court must speculate to some extent. As the hypothesis is false - for the plaintiff has been injured - the ascertainment of earning capacity involves an evaluation of possibilities, not establishing a fact as a matter of history. Hypothetical situations of the past are analogous to future possibilities: in one case the court must form an estimate of the likelihood that the hypothetical situation would have occurred, in the other the court must form an estimate of the likelihood that the possibility will occur. Both are to be distinguished from events which are alleged to have actually occurred in the past. Lord Diplock said in Mallett v. McMonagle:
"The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be contrasted with its ordinary function in civil actions of determining what was. In determining what did happen in the past a court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances, whether they are more or less than even, in the amount of damages which it awards."
(Citation omitted.)
124 Justices Deane, Gaudron and McHugh made a similar point when their Honours said (at 642-643):
A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded. See Mallett v. McMonagle; Davies v. Taylor; McIntosh v. Williams. The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place.
(Citations omitted; see also Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 349-351 per Mason CJ, Dawson, Toohey and Gaudron JJ; at 365-368 per Brennan J.)
125 In this case, the Court is concerned with the value of the lost opportunity, not the prior issue of whether it has been established on the balance of probabilities that there has been a loss of an opportunity. Clearly, there has been a loss of an opportunity in this case and I did not understand Globaltech to suggest the contrary (Generic Health Pty Ltd v Bayer Pharma Aktiengesellschaft [2018] FCAFC 183; (2018) 267 FCR 428 (Generic Health v Bayer Pharma Aktiengesellschaft) at [182]-[183]).
126 Globaltech submitted that unless the lost opportunity clearly coincided with what occurred, or coincides as a matter of practical certainty, some discounting is inevitable. Infringement of a patent is a statutory tort and the object of an award of damages is to compensate the innocent party by putting him or her in the position he or she would have been in had the tort not occurred. The object is not to punish the infringer unless an award of aggravated damages is in issue and that is not the case here (General Tire at 726 per Lord Wilberforce). Globaltech referred to Generic Health v Bayer Pharma Aktiengesellschaft and pointed out that the Full Court said that in the case of a hypothetical counterfactual short of a certainty, some discounting, albeit perhaps very modest, is inevitable (at [186]-[187]):
186 Whichever way one expresses it, in assessing the possibilities or probabilities of a hypothetical counterfactual, one is engaged in the task of estimation, even if the estimation involves an assessment of the counterfactual as being close to a certainty. But being close to a certainty is not the same thing as a certainty. If one is estimating, one still needs to apply a discount, albeit a very modest one, to reflect the assessment that one is not at a certainty. If one is looking at the value of a lost opportunity which is not certain to occur, then the valuation must involve some discount, even if a very modest one.
187 Given that Generic Health is a wrongdoer, it may be accepted that damages should be liberally assessed, although not, of course, to punish it: General Tire (1976) at 212 per Lord Wilberforce. The object is to compensate Bayer. To say that damages should be liberally assessed in no way cuts across what we have just said: that, in estimating or valuing a lost opportunity or in assessing a hypothetical counterfactual for any scenario short of certainty, some discount must be made to reflect that less than certain position, even if the discount is very modest indeed.
The discount applied by the Full Court was 2% in a case which bears some factual similarities to the present in terms of the number of market participants (see at [9]). (See also Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd [2017] FCA 250; (2017) 124 IPR 23 at [193] per Jagot J; H Lundbeck A/S v Sandoz Pty Ltd [2018] FCA 1797; (2018) 137 IPR 408 at [368]-[373].) Globaltech submitted, correctly, that resort to the notion that damages are to be assessed liberally (General Tire at 726 per Lord Wilberforce) does not in some way overcome the need for a discount (Generic Health v Bayer Pharma Aktiengesellschaft at [187]).
127 Globaltech submitted that a number of contingencies mean that there should be a heavy discount to Reflex's loss of profits claim. The way it presented its argument was to identify all of the contingencies and then argue for an overall discount of 30 to 40%. In other words, it did not seek to attach (necessarily) particular contingencies to the one to one assumption and then other contingencies to other elements of the calculation.
128 As I understood it, the contingencies identified by Globaltech were as follows:
(1) As I said, Globaltech relied on the fact that as a past counterfactual falling short of a practical certainty some discounting was inevitable;
(2) the generality of the evidence adduced by Reflex and its failure to adduce the best evidence available to it warranted a discount;
(3) the fact that Reflex had a different business model from that of Globaltech and BLYA meant that there should be a discount; and
(4) the fact that BLYA was not hiring the tools out for all the days in the month as pointed out by Mr Cameron in his third affidavit meant that there should be a discount. This is the matter addressed in Ms Wright's note.
129 I will deal with each of these arguments in turn.
130 With respect to the first alleged contingency, it is outlined above. I consider this to be a case (perhaps relatively rare) where, if a discount is called for, it is a small, or very small, discount. I say that because on the but-for counterfactual, Reflex would be the only supplier in the market. The reference to the mechanical core orientation tools and the market therefor is really a distraction because Reflex's case is that it would have picked up those customers in the market looking for an electronic core orientation tool, not those in the market who by necessity (i.e., vertical or near vertical drilling) or otherwise, were looking for a mechanical core orientation tool.
131 As to companies not wanting to deal with Imdex, that is certainly possible, but to my mind a negligible factor. It did not affect BLYA and, in any event, it is hard to see what other choice a company looking for an electronic core orientation tool would have.
132 With respect to the second matter, Globaltech began its argument in this respect by referring to the general nature of the evidence adduced by Reflex. It referred to the fact that a number of the statements contained in the evidence of Mr McGill and in the evidence of Dr Carey were general in nature and, although admitted, were admitted subject to arguments as to weight. In addition to these matters, Globaltech submitted that there was no evidence of the type one might expect in a case of this nature. There was no evidence of customers "transferring" from their use of the Reflex ACT Tool to the Globaltech's v5 Tool. There was no precise evidence as to how the market worked or how it was affected by the presence of the infringing tools. These deficiencies were not retrieved (so it was said) by the evidence of either Mr McGill or Dr Carey because their evidence was very general. This made it very difficult for Globaltech to meaningfully cross-examine witnesses as to what was actually done (Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd [2013] FCA 226 at [26] per Jagot J).
133 An allied point made by Globaltech is that it is well established that evidence as to what would have happened in a hypothetical situation is generally given very little weight (Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556; (2018) 136 IPR 8 at [273]-[286] especially at [276]-[277]).
134 There is a superficial attraction in some of the points made by Globaltech about the general nature of the evidence adduced by Reflex and that other more specific evidence was available. However, for reasons I will explain, I am not persuaded that there needs to be a discount for this reason. As to the submission about evidence typically called in cases of this nature, I see no deficiency in Reflex's case in this respect bearing in mind it is the only supplier in the but-for counterfactual. It is not a case where, for example, evidence about losing customers might be considered vital or, at least, highly significant.
135 The relevant points about the general nature of the evidence may be illustrated by reference to two examples in the case of each witness.
136 As I said earlier, Mr McGill prepared a spreadsheet which became Confidential Annexure LJM-5 showing, among other things, the rental revenue generated by ACT kits in the APAC region, including Australia, for the period July 2013 to January 2020. Mr McGill said that he was able to access some information which was Reflex specific, but some of the information he had provided in his affidavit was "Asia-specific information and not specifically referable to Reflex's business in Australia". Mr McGill said that he could have included information in his affidavit evidence (as distinct from producing the information) which specifically related to Reflex's business in Australia regarding Australia revenue information and he could have provided what were referred to as the "on hire" figures. He had to make assumptions about the figures in Confidential Annexure LJM-5 using APAC regional information. Mr McGill said that Reflex is able to access who the customers were which he used to build up the Australian only revenue number. Mr McGill said that he does not know why information about the Australian customers and their locations and about the tools they had were not included in his affidavit. Mr McGill was not involved in sales activities during the relevant period and he agreed that he himself had limited knowledge of the members of the sales team and their relevant period of service and so on. Mr McGill also gave evidence in relation to the cost of goods sold. I have already referred to that evidence (at [89]). Mr McGill calculated the cost of goods sold for Reflex's instrumentation business for the APAC region and then expressed the opinion that the information in relation to the APAC cost of goods sold was representative of Australia.
137 The examples in relation to Dr Carey's evidence are as follows.
138 The first example relates to Dr Carey's evidence about Reflex's capacity to manufacture additional tools at its manufacturing plant at Balcatta in Perth, Western Australia. I refer to the evidence set out above (at [83]).
139 Dr Carey was asked to provide her view as to whether there would need to be any changes to the resources allocated for manufacture if, during the relevant period, Reflex was required to manufacture an additional approximately 60 tools per month, that is, 30 kits, for an individual year. Dr Carey said that she was confident that demand for an additional 60 ACT Tools approximately per month over the course of a year would be within the capabilities of the manufacturing team. She considered that that would be the position without the need to resize already manufactured ACT Tools or to reallocate resources from other departments such as the sales team. Dr Carey considered that Reflex could have met part of this demand by utilising ACT Tools held in inventory.
140 The second example is Dr Carey's evidence with respect to the sales teams in the event that there was an increased demand for ACT Tools. I refer to the evidence set out above (at [92]).
141 Dr Carey was asked to provide her view on whether Reflex would have required additional staff in the sales team on the assumption that in the relevant period there were an additional 60 tools per month, that is, 30 kits, entering the rental fleet each month for a period of a year. Dr Carey considered that the answer to that question was "no". She said that the rental of ACT Tools involved minimal administrative work or client support and she described it as "low-touch". She does not consider that there would have been an increase in the number of staff members in the sales team or in the resources available to the sales team for the servicing of an additional approximately 60 ACT Tools, which equates to 30 ACT kits, a month or 360 ACT kits per year. Dr Carey pointed out that an additional 360 kits per year does not equate to 360 new customers per year and that, as many customers are repeat customers, a sales representative is not required to negotiate the terms of a rental contract each time an ACT kit is hired. In those circumstances, she considered that the administrative process is not resource intensive. She said that she was confident that an expansion of the ACT rental fleet by up to 360 ACT kits in one year during the relevant period would not require changes to the sales team.
142 Globaltech's argument is that, in these circumstances where, among other things, the evidence is so general, a discount to the damages which might otherwise be awarded was warranted. Globaltech's argument went further than this and it was submitted that the Court should draw a Jones v Dunkel inference to the effect that more precise evidence by way of oral evidence and documentary evidence would not have assisted Reflex in proving its but-for counterfactual (Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298).
143 I do not consider this to be a case for a Jones v Dunkel inference. Both witnesses were employed by Imdex or Reflex during the relevant period and both had knowledge of the areas about which they gave evidence. It is true that Reflex might have called factory employees and members of the sales teams employed at the time and those persons may have given evidence about the capacities of those sections of Reflex's business. It is also true that documents might have been tendered. For example, documents showing the inventory of components of ACT Tools held at the Balcatta manufacturing facility might have been tendered. Nevertheless, I do not consider this case to be a case for the drawing of a Jones v Dunkel inference. Having regard to the context, I am not prepared to infer that Reflex refrained from calling the evidence because it feared to do so. In any event, I am satisfied that the evidence is sufficient having regard to the context. Again, the fact that Reflex is the only supplier in the market in the but-for counterfactual is significant. The ACT Tools are successful aspects of a worldwide business which has been growing. Because of its success, it is an arm or line of the business to which Imdex and Reflex are prepared to commit resources by way of research and development. The ACT Tool is durable and low maintenance ("low-touch"). A number of Reflex's customers are repeat customers who would not have to have the terms and conditions explained to them on each and every occasion.
144 The third matter said by Globaltech to warrant a discount is the different business model of Reflex from that of Globaltech and BLYA. As developed, the argument was to the following effect. There are other counterfactuals than that postulated by Reflex. Reflex had not addressed the counterfactuals and if and how it would have benefited under those counterfactuals. This circumstance warranted a discount.
145 Globaltech identified two alternative counterfactuals. The first counterfactual comprises circumstances in which BLYA acquired all 1,177 infringing tools for on rental to customers and that would involve BLYA approaching Reflex, Reflex changing its established business model from one of rental to one of sale and Reflex deciding to sell tools to a competing Australian company for the purpose of that company on-hiring those tools in direct competition with Reflex's own business in Australia and globally, and Reflex making substantially the same profit as Globaltech in fact made. Globaltech submits that the difficulty with this scenario from Reflex's point of view is that it has not led evidence with respect to it. The second counterfactual is that BLYA's actual customers for the infringing tools would have become Reflex's customers for the ACT Tools in the counterfactual. Globaltech submitted that there are some evidentiary difficulties with that scenario, including the presence of manual core orientation tools and evidence that some customers might not have wanted to deal with Reflex or Imdex. Furthermore, this counterfactual does not deal with how Reflex would have addressed the 763 tools supplied to BLYA which were sent overseas.
146 It seems to me that once the split election issue is decided in favour of Reflex, the question as to the counterfactual is not raised in relation to the 763 tools. It is raised with respect to the 412 tools which were used in Australia. The issue as to an appropriate counterfactual does not arise in relation to the 763 tools because, in the case of those tools, the pecuniary relief is assessed on the basis of the facts as they occurred. None of this is to say that it is not open to Globaltech to say, as it does, that there are uncertainties in the particular counterfactual identified by Reflex.
147 With respect to the fourth matter, that is, that the Orifinder v5 Tools were not hired out every day of the month, Mr Cameron affirmed an affidavit shortly before trial. He sought to do so in order to clarify the meaning of statements made in his earlier affidavits in which he referred to or listed the number of tools "on hire" in a given month. His evidence is set out above (at [103]-[104]).
148 This evidence from Mr Cameron led to the preparation by Ms Wright of exhibit R13. That document of one and-a-half pages contains Ms Wright's calculation of the effect of that evidence on JER1 Agreed Calculation of $3,870,469 before interest. As I have said, the effect of Ms Wright's calculations is significant.
149 Globaltech submitted that Mr Ross' proposed answer to this evidence failed to meet the point. Mr Ross' answer was that Globaltech's utilisation rates would not be determinative of the utilisation rates and revenue. Globaltech submitted that the actual utilisation achieved by BLYA was the best indicator of what Reflex could have achieved in light of the evidence available and the need to form a view as to a "hypothetical counterfactual world". Nor was the other matter advanced by Mr Ross an answer. It was not correct to say that adopting the daily rental data addressed the wrong question. Globaltech submitted that the additional revenue Reflex would have achieved in the hypothetical counterfactual was closely related to and reflected by the rental model which BLYA used which was a daily rental model and what BLYA achieved in the market. It was clear from the evidence of Dr Carey that Reflex charged a daily rate. Although there was a difference between the way in which Reflex charged and the way in which Globaltech charged, that did not provide an answer to this point. The argument here is that Reflex charged whilst the tool was in a customer's possession, whereas Globaltech charged for the use of the tool. That might lead to higher charges in the case of Reflex because a tool may be in a customer's possession, but not used. However, what both suppliers did was to charge on a daily basis and that was standard in the industry.
150 Globaltech accepted that using BLYA's figures may lead to an understatement of Reflex's damages because of the difference between time when used and time when in possession. However, the best evidence of what would have occurred in the counterfactual was what occurred with BLYA since the hypothetical market which Reflex would have sought to access in the counterfactual world was the one which BLYA in fact accessed. At least some discount or form of adjustment is warranted. Mr Ross is critical of a number of aspects of Ms Wright's calculations. The way in which Globaltech put the matter was to say that it is also appropriate to make an adjustment because the parties have at all times through their respective expert accountants utilised BLYA data for the purposes of the damages calculation and the third affidavit of Mr Cameron "simply provides an additional layer of information concerning BLYA's previously provided data, which should be taken into account".
151 I will come back to this fourth matter after I have identified Reflex's response to Globaltech's claim that Reflex's loss of profits claim should be discounted.
152 Reflex denied that any discounting was warranted. It submitted that to the extent there were factors pointing towards a discount, there were equally factors pointing the other way.
153 The issue of discounts was addressed by the experts in the second joint experts' report. The experts note that Reflex's Statement of Issues does not refer to the concept of discounting. Globaltech's Statement of Issues does refer to the concept of discounting and the following question for the experts:
What discounts should be made in the damages calculation to reflect factors and contingencies such as:
(i) that not all sales of Infringing Tools by Globaltech Corporation to BLYA were lost sales to the Applicants; and
(ii) that not all rentals by BLYA to third parties were lost rentals to be Applicants.
154 Neither expert discounted their calculations for "factors and contingencies". Ms Wright specifically noted in her second report that her loss assessment did not allow for any risk associated with whether the but-for cashflows would have been achieved.
155 Mr Ross did not consider that there should be any discounting of his calculations of Reflex's loss of profits or Globaltech's profits from the sale of infringing tools. Mr Ross' reasons for this view were as follows.
156 First, Mr Ross did not consider that discounting in the sense in which that arises in relation to the discounted cashflow methodology was relevant. There was no single date of loss because, on Mr Ross' instructions, he was asked to assume that each supply of an infringing tool was a separate infringement of the Patent. Therefore, there was no single date of loss to apply in this matter. It seems that this is correct, but does not answer the main point made by Globaltech.
157 Secondly, Mr Ross did not consider that any discounting of the account of profits was warranted. In his view, he has calculated the actual profits made by Globaltech and that is the amount to which Reflex is entitled. In my opinion, this view is correct.
158 Thirdly, Mr Ross noted in his first expert's report that his calculation of Reflex's lost profits may be understated for any one or more of the following reasons:
(1) he had not considered any other loss to Reflex by reason of Globaltech's conduct other than the reduction in revenue from rentals due to the infringing tools. To the extent there was such other loss, Reflex's loss of profits is understated;
(2) he has not taken into account possible losses after the end of the relevant period; and
(3) he has made conservative assumptions as to the number of infringing tools, manufacturing costs of additional tools (note: based on 1,177 tools), manufacturing costs of each tool and selling costs (note: not based on Dr Carey's statements about selling costs not likely to change).
I will come back to these matters after I have fully outlined his evidence on these points.
159 The experts note a difference in one assumption in two calculations of Reflex's lost profits. The first set of calculations assume, consistent with Mr Ross' instructions for his first report, that had Globaltech not supplied infringing tools in the extended relevant period, the same number of ACT Tools (i.e., on the available information 1,177 infringing tools) would have been rented out by Reflex and the latter calculations assume, consistent with the assumptions Mr Ross adopted for his second report, that had Globaltech not supplied infringing tools in Australia in the extended relevant period, Reflex would have rented out at least the same number of ACT Tools in Australia. Mr Ross is not able to express any opinion on which, if either of these calculations was more likely to represent Reflex's lost profits, as to do so requires expertise in the operation of the market for ACT Tools.
160 Ms Wright remained of the view that the calculations do not adequately account for the risk that the but-for scenario cashflows in the assessment of Reflex's lost profits would not have been achieved. The current calculations do not, but should, include a discount to allow for factors and contingencies, such as those posed in the question in the respondents' Statement of Issues. Ultimately, however, the matter is one for the Court to determine. Ms Wright agreed with Mr Ross that it would be "less necessary" to apply a discount to any assessment of Globaltech's account of profits given that the profits were actually earned by Globaltech.
161 In the joint session, Mr Ross said that he considered that a number of his assumptions were conservative and that this was to be weighed against any factors suggesting a need for discounts. Those matters were identified in his first and second reports. Mr Ross said that he had identified the conservative assumptions that he had made and he referred to the manufacturing costs trigger point as one of those. He then went on to say the following:
As time has gone on and we've been given more information, some of the issues of uncertainty have abated. So we've now moved from 1177 calculation to the 412 calculation, and that removes a substantial degree of uncertainty. No doubt there may be other issues that are considered as still uncertain.
162 Ms Wright agreed that the question of whether there needs to be any discounts applied is "more relevant" to the 1,177 Calculation. The point she made was because the 1,177 Calculation resulted in what she considered to be a significantly overstated figure, there was a need for a greater discount. She further said that because the 412 Calculation was grounded in BLYA's actual experience, that reduced the uncertainty in achieving the cashflows and so there was less need to consider discounting.
163 Mr Ross said that he was in a position to produce calculations in accordance with such assumptions as the Court considered should be made. For example, he would be able to calculate Reflex's lost profits if the Court considered that it would not have achieved a one to one rental and instead would have achieved a rental of, for example, nine out of the ten tools rented by BLYA. Ms Wright agreed that that could be done. The experts agreed that they would also be able to calculate the total royalty figure in the event that the Court considered a reduction in the one to one assumption was appropriate.
164 I turn to examine those matters which Mr Ross identified as his conservative assumption which can be weighed against factors suggesting the need for a discount. First, I do not think other unidentified loss falls into this category. It is not known whether there is such loss, or the possibility of such loss. Secondly, I do not consider that possible loss after September 2019 can be weighed in the balance. Although in view of Mr Hejleh's evidence in cross-examination, I think it distinctly likely there were infringing tools being used overseas after September 2019, the fact is that there is no claim made for such loss. With respect to the assumption about the Utilisation Threshold, that could in theory be invoked in this context, but I take the view for the reasons set out below, that the percentage adopted by Mr Ross is appropriate, rather particularly favourable to Globaltech. With respect to Mr Ross' approach to the manufacturing costs for each ACT Tool, I consider that to be favourable to Globaltech and a matter that can be taken into account, although it is fairly minor. I am unable to quantify in a sensible way any "benefit" to Globaltech from Mr Ross' approach to selling costs.
165 I return to the question of whether there should be a discount of the damages award. I consider the fourth matter identified by Globaltech (see [147] above) largely falls away because I am persuaded that although Reflex had conducted its case of lost opportunities by reference to the number of BLYA rentals, that did not mean that once those numbers are ascertained, it was not then appropriate to have regard to Reflex's method of charging. I consider it is appropriate to have regard to Reflex's method of charging which was from dispatch of the tool to its redelivery. To the extent there is any remaining force in the fourth matter identified by Globaltech, I take it into account together with the first matter in arriving at the conclusion that a small discount of the damages award of 3% is appropriate. I do emphasise that in reaching the conclusion that the discount should be small, I have placed significant weight on the circumstance that Reflex would have been the only supplier of electronic core orientation tools in the but-for counterfactual.
166 Reflex put a submission that were the Court to reach the conclusion that there was to be a discount in the damages award based on loss of profits, the extent of the discount should be reflected in damages based on lost royalties or reasonable user charges. This is the argument put by Reflex as an alternative argument in the event that its election was invalid and it was left to claim damages in relation to the 763 tools exported from Australia (at [26]).
167 Reflex puts its argument in the context of the one to one assumption as follows. Assume 100 tools are rented by BLYA, then the relevant translation for the purposes of the calculation is 97 lost opportunities to Reflex. In that context, Reflex submits that there are three tools for which Reflex receives royalties or reasonable user fees. It is more difficult to translate other discounting factors not directly related to the one to one assumption to the necessary element of the equation, i.e., 97:100. Reflex submitted that the royalties received by the infringer, that is, Globaltech, are the appropriate measure and the calculation of Globaltech royalty could be performed say the experts.
168 Globaltech put two arguments against Reflex's alternative argument. Those arguments were, in fact, put in response to Reflex's alternative argument in the context of the split election, but there is no reason the same arguments are not equally relevant to the present issue.
169 Globaltech's first argument at one point seemed to be that to approach the matter in the manner suggested by Reflex was "illogical". Reference was made by Globaltech to the Full Court's decision in Generic Health v Bayer Pharma Aktiengesellschaft and the fact that the Court made a discount of 2% without any reference being made to an allowance with respect to the 2% by way of a royalty or reasonable user fee. Insofar as it was being suggested by Globaltech that a lost profits case could not be combined and conducted with a claim for royalties or reasonable user fees, I do not think that is right. That seems to be contrary to a long line of authorities. I have set out the relevant authorities and passages above (at [27]).
170 Globaltech was on firmer ground with its second argument. It submitted that such an alternative claim was not made, or clearly made, by Reflex and that it was wrong for Reflex to suggest that the calculation of the claim would involve no more than a simple and straightforward calculation by the experts.
171 The matter is not in the Statement of Issues or the Response thereto in circumstances in which the issue of the one to one assumption and the issue of discounts is raised. One might have expected it to have been raised. It is not addressed in the expert's respective reports or the joint experts' reports. It could have been addressed as an alternative and some calculations proffered, recognising at the same time that the precise discount would not have been known until the Court had delivered its reasons.
172 Relatedly, there is the issue of the appropriate quantification of the royalty or reasonable user fee, both whether that issue has been adequately explored and whether the royalty paid to Globaltech is an appropriate measure. I am not convinced on the first issue. On the face of it, the royalty paid to the wrongdoer seems a reasonable measure, but the parties have had ample opportunity to raise the matters they wished to raise and I do not consider it appropriate to allow Reflex to raise the matter and put further calculations at this late stage.
173 There should be a discount of 3% and Reflex's alternative argument is rejected.