Are noninfringing alternatives relevant to the determination of reasonable royalties in U.K. patent cases?

Most economists, and I imagine most patent attorneys as well, would respond to the above question by stating "How could noninfringing alternatives not be relevant?"  After all, if a reasonable royalty is intended to approximate the royalty the patentee and the infringer would have agreed to ex ante--the so-called willing licensor-willing licensee framework, some version of which most major patent systems appear to follow--it's hard to imagine how noninfringing alternatives could not be relevant.  The maximum amount a would-be user would pay for the use of a patented technology is the benefit he expects to derive from using that technology minus the net benefit of using the alternative.  Courts in the U.S., Canada, and Germany seem to recognize this principle as well, as I explain in my book (see pages 121-22, 128-29, 195-96, 268).  Indeed, the principle was recently reaffirmed in a German case (OLG Karlsruhe, Judgment of Aug. 5, 2013, 6 U 114/12, para. 76), that was reported in a recent issue of GRUR-RR and is also available here).

One major outlier is, arguably, the U.K.  As I have explained in my book and elsewhere, an 1888 decision of the House of Lords, United Horse-Shoe & Nail Co. v. John Stewart & Co., (1888) L.R. 13 App. Cas. 401 (appeal taken from Scotland), held (for no very persuasive economic reason, and contrary to U.S. practice) that noninfringing alternatives are irrelevant for purposes of determining lost profits.  Courts in the U.K. have continued to cite United Horse-Shoe favorably ever since.  Compounding the error, a 1983 decision of the Patent Court held that noninfringing alternatives also are irrelevant for the purpose of determining a reasonable royalty as well.  See Catnic Components Ltd. v. Hill & Smith Ltd., [1983] F.S.R. 512, 532 (Pat. Ct.) (Eng.):

In the United Horse Shoe and Nail Company Limited case to which I referred earlier the House of Lords held that in assessing damages for infringement on loss of sales basis it is beside the point that the defendant could have arrived at the same result by lawful means, i.e. without infringing the plaintiff's rights by selling a non-infringing article, and it seems to me that the same principle must apply in determining what is a proper rate of royalty to be paid by an infringer when assessing damages on the basis of a notional royalty in a case where there has been no actual licensing of the patent. 

To my knowledge, since Catnic there has been no reported patent decision from the U.K. repudiating Justice Falconer's analysis in that case.  I was taken aback, then, why I read in the AIPPI U.K. Group's Report on Relief in IP Proceedings Other than Injunctions or Damages the following statement (at p.10; emphasis added, footnotes omitted): 

When a normal rate of royalty would not have been possible, the Courts may order damages to be assessed by what price could reasonably have been charged for permission to carry out the infringing acts (the 'User Principle').  The Court will consider the appropriate sum to be the amount the infringer would have paid if both parties (acting reasonably), with their actual strengths and weaknesses, had bargained as willing licensor and licensee.  The English Courts will take into account there was a potential non-infringing alternative to using the IPR holder's rights when considering the damages payable.

(Readers may recall that I've published two posts on AIPPI Q236, here and here, and I intend to post one or two more in the near future.  AIPPI Q236 is not limited to patent cases, but rather discusses all types of IP cases)  The case cited in support of this last sentence is 32Red Plc v. WHG (International) Ltd, [2013] EWHC 815 (Ch) (I.P. High Court 2013). This case is available online here.  It's a trademark infringement case, and it follows the teaching of a case involving an alleged misuse of confidential information, Force India Formula One Team Ltd v. Malaysia Racing Team Sdn Bhd, [2012] EWHC 616 (Ch) (High Court 2012) (available here).  In the latter case, which is quoted by Justice Newey in 32 Red Plc, Justice Arnold states as follows:

1. This leaves two specific issues to be resolved. Counsel for Force India relied upon the principle stated by Lord Macnaghten in the context of patent infringement in United Horse Shoe & Nail Co Ltd v Stewart (1888) 5 RPC 260 at 268:
   

"The decision in the patent action and the minute of admission in the present case establish beyond question that in selling the 'Shoe' brand nails, the respondents infringed the appellants' rights. The sale of each and all of those nails was unlawful. It appears to be beside the mark to say that the respondents might have arrived at the same result by lawful means, and that, without infringing the appellants' rights, they might have produced a nail which would have proved an equally dangerous rival of the 'Globe' nail. The sole question is, what was the loss sustained by the appellants by reason of the unlawful sale of the respondents' nails? The loss must be the natural and direct consequence of the respondents' acts."

This principle has been regularly applied in patent cases since then.

2. Counsel for the Corporate Defendants argued that this principle only applied to the first type of case identified by Lord Wilberforce in General Tire v Firestone [i.e., lost profits], and not to the third type of case [reasonable royalties]. More importantly, he submitted that, whatever might be the position with respect to patent infringement, the principle certainly did not apply to the third type of case in a breach of confidence claim. He argued that, as a matter of logic, in assessing the licence fee or royalty that would be negotiated between a willing licensor and willing licensee each making reasonable use of their respective bargaining positions, the availability or otherwise of the information from an alternative, lawful source was a highly material consideration. He further argued that, as a matter of authority, this analysis was supported by Seager v Copydex (No 2) and Dowson & Mason v Potter. Counsel for Force India had no convincing answer to this submission, and I accept it.

The two cases cited in paragraph 426, Seager v. Copydex (No 2), [1969] W.L.R. 809 (Ct. App.), and Dawson & Mason v. Potter, [1986] W.L.R. 1419 (Ct. App.), are also cases involving alleged breaches of confidence.

So, what is the state of the law in the U.K. on the status of noninfringing alternatives in patent cases in which the plaintiff seeks a reasonable royalty? Presumably future case law will tell us, but it is certainly true that United Horse-Shoe is not directly on point, since it dealt with reasonable royalties, and (I assume) courts are not obligated to follow Catnic, which is a Patent Court (that is, trial court) case.  As I noted in another recent post, one of the other holdings of the court in Catnic, that punitive damages are not available for patent infringement, is also likely not an accurate statement any longer of English law.  More importantly, perhaps, ignoring noninfringing alternatives for the purpose of calculating reasonable royalties is simply bad economics, and does not appear to be the law in other major patent systems.  All of this should weigh in favor of overruling Catnic on this point in some future case.