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Monday, 18 December 2006

Fire helmets: Moses lays down the law; Teeth continue to bite the dust

Fire helmets: Moses lays down the law

The Court of Appeal for England and Wales, in a decision given last Friday by Lord Justice Moses on behalf of the Court (which also included May and Lloyd LJJ), has held that an employee was not in breach of any fiduciary obligation to his ex-employer by setting up a competitor: his own preparatory activity could not be described as competitive activity in the context of his employment and his employer had not restricted his freedom to prepare for future competition on his departure. This ruling is in Helmet Integrated Systems Ltd v Mitchell Tunnard and others [2006] EWCA Civ 1735, reported here on BAILII.

Helmet made and sold protective equipment, including a popular fire fighters' helmet. Tunnard, a senior salesman for Helmet, was required to advise Helmet on the activities and prices of its competitors. In the period leading up to his resignation, Tunnard started developing the idea of a protective helmet which he believed Helmet would not be interested in making. He had drawings prepared and received finance through an award scheme. After leaving Helmet, Tunnard set up a company in which one of Helmet's competitors took a major shareholding.

Helmet, none too pleased about all this, alleged that Tunnard had (i) breached his duty of fidelity by developing a safety helmet that competed with its own and (ii) breached his fiduciary duties in failing to report his activities while still employed by Helmet. The trial judge rejected these claims, concluding that Tunnard's actions were no more than preparatory to competitive activity. Helmet appealed, arguing that the judge had failed to spot the fiduciary duty owed by Tunnard or to notice that both that duty and his duty of fidelity had been breached. According to Helmet, Tunnard was obliged to advise on competitors' activity and that, since Helmet depended upon the unsupervised fulfilment of Tunnard's obligation, Tunnard owed a duty as a fiduciary.

The Court of Appeal dismissed Helmet's appeal. In its view

* The duty of good faith and loyalty owed by every employee should not be confused with a fiduciary obligation.

* Since Tunnard's activities would have amounted to competitive activity if they were done by a competitor, he owed an obligation as a fiduciary not to misuse information about such activity for his own benefit or for the benefit of someone other than Helmet.

* It did not however follow from this that he was under any obligation, fiduciary or otherwise, to tell Helmet about his own activities: the words of his job specification did not restrict his freedom to prepare for competition on leaving and he was under no relevant fiduciary obligation to Helmet.

Right: the IPKat found this little gem on

* When he started work for Helmet, Tunnard was entitled to believe that he could, subject to his obligations as to notice, leave when he wanted and work in competition with Helmet. He was entitled to take preparatory steps before leaving, in order to assess the viability of any potential competitive activity.

* Clear words are needed if an employer is to restrict the ordinary freedom of an employee who considers quitting his employment and setting up in competition with his former employer.

* Tunnard owed no fiduciary obligations in relation to the development of a preliminary concept for a new helmet and was not in any event in breach of any such obligation by seeking to raise funds for such a project while still in employment.

The IPKat notes that Helmet did not appear to press any argument based on the misuse by Tunnard of any confidential information or privileged access to commercial or technical data. This being so, it was forced to rely on a duty of fidelity and a fiduciary duty - both being duties that the Courts appear unwilling to find to exist where (i) the party relying on them had the opportunity to stipulate its requirements in writing but failed to do so and (ii) enforcement of such a duty would be tantamount to a bar on competition or a restraint of trade. Merpel says, although this looks like a case where prudent drafting would have protected the ex-employer, it's also an instance where prudent drafting would have helped the ex-employee too - it's a classical situation in which the aggrieved former employer will sue even though the outcome is uncertain-to-poor, if only to deter other employees from doing the same thing.

Teeth continue to bite the dust

Also available on BAILII is the Court of Appeal's most recent decision in the long-running saga of Halliburton Energy Services Inc v Smith International (North Sea) Inc and others [2006] EWCA Civ 1715 (before Lords Justices Chadwick, Rix and Jacob, judgment delivered last Friday, 15 December). Thanks, Simon Haslam (Abel & Imray), spotting it.

This was Halliburton's appeal against the decision of Pumfrey J (here , noted by the IPKat here), that its patent for rotary cone drill bits was invalid for insufficiency. This patent, which concerned force balancing, was addressed to persons who wanted both to design and use simulation systems for drill bit design. The patent used a "rock bit computer model" in order to calculate the dynamics of a rotating bit. Halliburton's patent included claims for a method of designing a roller cone bit, calculating the axial forces acting on the bit and adjusting the design until the same axial force acted on each cutting structure when the bit was in operation, as well as for a drill bit in which the axial forces were so balanced. According to Pumfrey J the patent was void for insufficiency because the claims in effect required the addressee to go to the great effort of developing a computer model to carry out the claimed method. The background to the patent's specification mentioned a paper by one Ma, who had developed computer programs predicting and simulating patterns developed by roller cone bits. According to Halliburton the patent's inventive concept was that the motion of the cones and teeth of the bit should be modelled mathematically, as should the forces acting on the bit and its components, so that downward forces on each cone could be balanced as between the cones, implementation of that idea being essentially a matter of producing a usable computer simulation that, even if only approximate, was sufficiently accurate for practical purposes - or at least not so inaccurate as to be useless.

The Court of Appeal dismissed Halliburton's appeal.
* The person (or in this case the team) skilled in the art would not have enough information to construct a kinematic model of the bit, showing how the various components moved in relation to one other. Simulation of the motion of the cones and the drill bit in such a way that the trajectory of the teeth could be followed would require a vast amount of work in both deriving and calculating the relevant equations. Even though those equations had been published by Ma, this was not part of the prior art and, even if they had been part of the prior art, the amount of work involved in the calculations was massive.

* If what was taught in the patent involved too much work to be reasonable, allowing for all the circumstances including the nature of the art, the patent could not be regarded as an enabling disclosure.
Phew, that's a tough one to blog, says the IPKat, but the principle is sound. His basic rule is this - if it takes longer to work out how to go about putting the patent into effect than it takes to understand what it's about in the first place, it should be void for insufficiency. Merpel says, it's such a nice word, insufficiency, but I just don't seem to find it anywhere in the European Patent Convention ...


Luke Ueda-Sarson said...

Merpel's point is a good one. The Australian High Court has some very interesting comments on this very issue too in their important Lockwood case of 2004. The following passage (paragraphs 63-67) is well worth reading, especially the last two sentences.

It is necessary to bear in mind, in examining United Kingdom cases, that in 1977 the language of fair basing disappeared from the United Kingdom legislation on its being changed to give effect to the European Patent Convention. Section 14(5)(c) of the Patents Act 1977 (UK) ("the 1977 UK Act") provided instead that the claims had to "be supported by the description" of the invention in the specification.

The in suit in Biogen Inc v Medeva plc related to a DNA sequence coding for hepatitis B virus antigen to stimulate the production of antibodies, and claimed priority from an earlier application ("Biogen 1"). If Biogen 1 did not support in the necessary sense the patent in suit then the patent was invalid because it was conceded that the invention was obvious when the application for it had been filed. The House of Lords upheld the decision of the Court of Appeal which, reversing Aldous J, held the patent invalid. Biogen 1 described one recombinant procedure for making the necessary antigen but this did not justify the claim made by the later patent for any recombinant method for making the antigen. The claimed invention was too broad.

Doric cited Biogen in support of a submission that Lord Hoffmann was of opinion, "in a very closely related context", that the Patentee's argument in this case was "mechanistic and impoverished". Doric referred to a statement by Lord Hoffmann:

"[C]are is needed not to stifle further research and healthy competition by allowing the first person who has found a way of achieving an obviously desirable goal to monopolise every other way of doing so."

Doric also relied on the following passage[70]:

"[T]here is an important difference between the 1949 and 1977 [UK] Acts which make decisions on the earlier Act an unsafe guide. Section 72(1)(c) of the 1977 [UK Act] is not only intended to ensure that the public can work the invention after expiration of the monopoly. It is also intended to give the court in revocation proceedings a jurisdiction which mirrors that of the Patent Office under section 14(3) or the [European Patent Office] under article 83 of the [European Patent Convention], namely, to hold a patent invalid on the substantive ground that, as the [European Patent Office] said ... , the extent of the monopoly claimed exceeds the technical contribution to the art made by the invention as described in the specification. In the 1949 [UK] Act, this function was performed by another ground for revocation, namely that the claim was not 'fairly based on the matter disclosed in the specification' (section 32(1)(i)). The requirement of sufficiency was therefore regarded as serving a narrower purpose. But the disappearance of 'lack of fair basis' as an express ground for revocation does not in my view mean that [the] general principle which it expressed has been abandoned. The jurisprudence of the [European Patent Office] shows that it is still in full vigour and embodied in articles 83 and 84 of the [European Patent Convention], of which the equivalents in the 1977 [UK] Act are section 14(3) and (5) and section 72(1)(c)."

# Section 72(1)(c) provides that a patent may be revoked on the ground that "the specification of the patent does not disclose the invention clearly enough and completely enough for it to be performed by a person skilled in the art". It and its corresponding provision creating a positive duty of disclosure, s 14(3), do not resemble the Australian fair basing requirement in s 40(3) of the Act, but are closer to s 40(2)(a) creating a duty to describe the invention fully. Further, Australia is not party to the European Patent Convention. The courts of Australia are not bound by what the European Patent Office says, and do not regard it as "jurisprudence". The language of the 1949 UK Act continues to be reflected in Australia in s 40(3) of the Act. Lord Hoffmann's reasoning suggests that in the United Kingdom the fair basing test has gone, rather than that it has survived.

The inapplicability in Australia of the reasoning in Biogen is heightened by the fact that Lord Hoffmann applied the words "mechanistic and impoverished", not to the patentee's argument under consideration, but to a "general rule of European patent law that an invention was sufficiently disclosed if the skilled man could make a single embodiment." That happens also to be the rule recognised in this Court's construction of s 40(2)(a) in Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd. This criticism of an important aspect of Australian law, as reflected in s 40(2)(a) of the Act, suggests that current United Kingdom law is no guide to Australian law on s 40(3). (The same is true of the treatment in Biogen of obviousness.) Doric was frank enough to boil the House of Lords' reasoning down to the following Voltairean aphorism: "Since the fair basis doctrine no longer exists, it is necessary to invent it." That is not an approach open to this Court.

Cheers, Luke Ueda-Sarson

Jeremy said...

Thanks so much, Luke, for your most thoughtful comment. I really appreciate the time and trouble you've taken - and I think I speak for all the IPKat's readers too.

Chris.H said...

Correct me if I'm wrong, but doesn't the word appear - at least in its affirmatory adjectival form "sufficiently" - in Article 83 EPC. (Admittedly, the UK draftsman appears to prefer "enough" in s14(3) - from which it would be somewhat awkward to derive "non-enoughility"). Or are we talking here about 'the kind of meticulous verbal analysis which lawyers are too often tempted by their training to indulge' - in which case we should beware that neither "novelty" nor "non-obviousness" are to be found in Articles 54/56...

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