It was “a long-running one, spanning close to 12 years and leaving a number of written judgments in its wake”, said Judge of Appeal Tay Yong Kwang of the case that saw Singapore’s United Overseas Bank (UOB) and one of the bank’s vendors sued for millions of dollars over patent infringement.
While the Singapore bank was found to have infringed the patent of a currency conversion system, it escaped the full extent of the claims levelled against it.
The long-running suit was brought by Irish currency conversion provider Main-Line Corporate Holdings against UOB and the other party, First Currency Choice (FCC), in 2004.
Main-Line had once been a corporate vehicle holding the intellectual property assets of Irish financial services provider, Fintrax Group.
Main-Line had been in talks with UOB between July 1999 and June 2000, over providing its automatic currency conversion system to the bank.
Main-Line’s patent, “Dynamic Currency Conversion for Card Payment Systems”, covers a method and system of determining the operating currency of a payment card at the point of sale between the merchant and the cardholder.
It converts the value of the card transaction from the currency of the country where the point-of-sale system is located to the currency of the card’s country of issue, and presents both values for cardholder to choose.
“This is in contrast to the common technology where the foreign cardholder has to choose his preferred currency manually at the POS terminal, which accordingly carries the potential of operator error,” said Justice Tay, in his judgment out just days ago, which assessed the damages in this case.
The talks between Main-Line and UOB concluded without a deal being struck.
Meanwhile, FCC – a Singapore company whose main business then was the provision of dynamic currency conversion to its clients – had approached UOB with its currency conversion system; they inked a multicurrency exchange agreement (MEA) deal in October 2001, where UOB would make FCC’s system available to its merchants.
It was decided, in an earlier trial on liability, also heard by Justice Tay, that both UOB and FCC had infringed Main-Line’s patent between May 2002 and December 2007.
FCC’s card currency recognition system performed the same function as Main-Line’s patented system.
UOB and FCC both appealed this finding, but their actions were dismissed by the Court of Appeal.
Main-Line then sought as remedy an account of profits from UOB and damages from FCC.
It sought against UOB:
- a 3 per cent “uplift” on converted transactions;
- the commissions UOB received from FCC under the MEA; and
- the profit UOB earned from acquiring new merchants or retaining existing merchants as a result of using FCC’s system.
- From FCC, it sought, among other things:
- damages, as measured by the lost profits it would have earned from entering into a similar agreement with UOB;
- exemplary damages resulting from patent infringement amounting to S$34.5 million.
The “uplift” refers to the administrative fee or mark-up stipulated in cardholder agreements that an issuer earns when the issuer’s card is used overseas and the currency needs to be converted.
It was decided, in this case, that the uplift was 3 per cent of the original transaction value.
Justice Tay decided that Main-Line’s claim against UOB for the 3 per cent uplift was “unmeritorious”.
He said that UOB had forgone the 3 per cent uplift for a commission from FCC of about 0.5 per cent of net turnover.
“The bank’s focus was not purely on profits and losses but also providing quality services to their merchants . . . I find that the 3 per cent uplift went to FCC and, accordingly, the plaintiff’s claim against UOB for this head of profit fails.”
He also dismissed Main-Line’s claim that UOB earned profits from acquiring new merchants or retaining existing merchants as “pure conjecture”.
As for the commissions paid to UOB, it was not disputed that this amounted to S$3.158 million, which represented the general commission rate of 0.5 per cent of an estimated net turnover of S$627 million over the period.
Justice Tay then decided that UOB could deduct from these profits an expense amount calculated using UOB’s expense ratios (ranging from 34.7 per cent to 41.4 per cent of income); this brought the commission earned down to S$1.962 million.
This was the only amount he deemed UOB liable for; but, as the bank had already paid a sum of S$1.962 million to Main-Line at an earlier stage of these proceedings, the judge ruled that “I make no further award on the plaintiff’s claim against UOB”.
As for Main-Line’s claims against FCC, Justice Tay decided that “the measure of damages due to (Main-Line) should be a quantum equivalent to its loss of profits arising from FCC’s actions”.
“It is therefore not unreasonable to proceed on the basis that FCC’s revenue stream under the MEA could have been that of the plaintiff’s but for FCC’s infringement of the patent.”
He did not agree, however, that Main-Line would be entitled to the entire quantum of FCC’s revenue stream under the MEA and assessed the damages payable by FCC in this regard, after taking out the relevant cost components, to be S$4.795 million.
As for the exemplary damages of S$34.5 million sought by Main-Line, Justice Tay ruled that, “(Main-Line) has not shown that FCC’s actions were particularly egregious . . . Therefore the plaintiff’s claim for exemplary damages against FCC is dismissed.”
UOB was represented by Eddee Ng of Tan Kok Quan Partnership; Main-Line by Wong Siew Hong of Eldan Law LLP; and FCC by Oh Pin-Ping of Bird & Bird ATMD LLP.
michquah@sph.com.sg
This article was first published on January 4, 2017.
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