Watson, Laidlaw, & Co., Ltd v. Pott, Cassels, & Williamson

Factual and Procedural Background

The Respondents hold a patent (granted in 1903) for an improvement designed to reduce oscillation in centrifugal machines. The Appellants manufactured and sold 252 machines incorporating the patented feature without authorisation. Liability for infringement was conceded; the sole dispute concerned the quantum of damages.

At first instance, the Lord Ordinary of the Court of Session awarded £1,500. On a reclaiming note, the Second Division doubled that figure to £3,000. The Appellants appealed to the House of Lords, contending that the increase was unjustified. The Lords heard argument on 14 March 1913 and delivered judgment affirming the £3,000 award, with Judge Halsbury dissenting.

Legal Issues Presented

1. Whether an appellate court (the Second Division) is entitled to reassess factual findings of the Lord Ordinary when determining damages in Scotland.
2. What evidential standard a patentee must meet to quantify loss arising from sales by an infringer.
3. Whether the £3,000 award exceeded the loss proven and should be reduced to the Lord Ordinary’s £1,500 figure.
4. How sales that the patentee could not itself have made (e.g., in “The Island”) should be treated when calculating damages—specifically, whether a reasonable royalty may supplement lost-profit analysis.

Arguments of the Parties

Appellants' Arguments

• The Lord Ordinary’s £1,500 assessment should stand because findings of fact by the judge who heard witnesses are analogous to a jury verdict and should not be disturbed absent error of law.
• Many of the 252 infringing machines—particularly over 130 sold in “The Island”—would never have been purchased from the Respondents. Purchasers were allegedly attracted by the marketing skill of Person A and Person B, not by the patented feature; therefore those sales caused no loss.
• Any further damages would constitute an impermissible windfall, given the Respondents’ limited market reach.

Respondents' Arguments

• Every infringing sale constitutes a legal wrong and a source of compensable loss.
• The Lord Ordinary provided no reasons for the £1,500 figure; the Second Division correctly re-examined the evidence and found greater loss.
• Evidence (including circulars distributed by Person A) showed that the patented buffer was the main selling point and that many purchasers would have bought from the Respondents but for the infringement.
• Even where the Respondents could not themselves have sold machines, a reasonable royalty (10s. per inch, averaging c. £17 per machine) represents the value of the appropriated monopoly.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

Jurisdiction to Review Facts. Judge Kinnear (for the majority) rejected the submission that the Lord Ordinary’s assessment was immune from review. Under Scottish procedure, an aggrieved party may appeal on fact as well as law, and the Inner House was obliged to form its own view of the evidence.

Adequacy of Proof. The majority held that the Respondents had shown substantial loss. The Appellants admitted 252 infringing sales; accounting evidence indicated that comparable lawful sales yielded profits approaching £5,000. While exact computation was impossible, the burden of rebutting that inference lay on the Appellants and was not met.

Treatment of “The Island” Sales. Judge Atkinson and Judge Shaw addressed the contention that the Respondents could not have supplied the 130 machines sold in “The Island.” They reasoned that, even if true, the Respondents were at least entitled to a reasonable royalty for unauthorised exploitation of their monopoly. Applying the agreed rate of 10s. per inch produced more than £2,000 for these sales alone.

Combination of Approaches. Judge Shaw articulated two complementary principles: (1) restoration—compensating the patentee for lost trade it would probably have secured; and (2) price or hire—requiring the infringer to pay a royalty for trades the patentee could not itself undertake. Both principles could be applied sequentially without duplication.

Dissent. Judge Halsbury would have ordered a new assessment, expressing doubt about any figure on the existing record and criticising the absence of clear reasoning from the Lord Ordinary.

Holding and Implications

HOLDING: The appeal is DISMISSED; the award of £3,000 in damages stands.

Immediate Effect: The Appellants must pay £3,000 plus costs. Broader Implications: The decision confirms that Scottish appellate courts may revisit factual findings when assessing damages, clarifies that infringing sales outside the patentee’s own market may still attract a reasonable-royalty award, and underscores that the infringer bears the risk of uncertainty once infringement is proven.