For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Tuesday, 26 November 2013

A closer look at whether to Stay, and whether to heed the Supreme Court

Our beloved blogmeister posted a short report last week on the decision of the Court of Appeal in the IPCom/HTC case, concerning the guidance on whether patent infringement cases should be stayed in this country when there are pending opposition proceedings at the European Patent Office.

The timing of the decision was very interesting to this Kat.  Just the previous week Lord Justice Floyd, who gave the leading judgment in this decision, gave the Herschel Smith Lecture. Entitled "What has IP done for the law?", one of the themes of the lecture was welcoming the idea that decisions of the Patents Court have to survive legal scrutiny by non-IP specialists in higher courts.  This moggy, by contrast, has just published a rather polemical article in the Journal of Intellectual Property Law & Practice, whose controversial thesis is that non-specialist superior courts can not in general be trusted with patent matters.  While UK Courts did not contribute much to the examples in this article, this moggy's human amanuensis did find fault with Lord Sumption's criticism (in the Virgin/Zodiac decision) of the assumptions upon which the guidance of the Court of Appeal on whether patent infringement actions should be stayed were based.  This guidance is set out in the Glaxo/Genentech case, and what Lord Sumption said about it was:

I add a brief observation on the procedural implications. If I had concluded that the defendant was estopped from relying on the revocation or amendment of the patent once the court had adjudged it to be valid, that would have had important implications for the question whether English proceedings should be stayed pending a decision in concurrent opposition proceedings in the EPO. On that footing, it would in my opinion have been essential to stay the English proceedings so that the decision of the EPO would not be rendered nugatory by the operation of the law of res judicata. On that hypothesis, it would have been difficult to defend the guidance given by the Court of Appeal in Glaxo Group Ltd v Genentech Inc [2008] Bus LR 888 to the effect that the English court should normally refuse a stay of its own proceedings if it would be likely to resolve the question of validity significantly earlier. The effect of that guidance is to put more litigants in the impossible situation in which successive decisions of the Court of Appeal placed the parties in this case. As it is, the problem has not gone away, even on the footing that those decisions are overruled. In the first place, a similar problem may well arise if the patent is revoked by the EPO after a judgment has been given for a liquidated sum. Second, that problem is aggravated by the fact that a decision of the English court on validity is directly effective only in the United Kingdom, whereas the EPO’s decision, being the decision of the authority which granted the patent, is directly effective in every country for which the patent was granted. Third, even if the EPO opposition proceedings are concluded in time to affect the English proceedings, the uncertainty and waste of costs involved do little credit to our procedures. This is not a suitable occasion, nor is the Supreme Court the appropriate tribunal to review the guidelines, but I think that they should be re-examined by the Patents Court and the Court of Appeal.

(What the article criticised was not this part of the judgment, but rather Lord Sumption's criticism earlier in his speech of Jacob LJ's "assumption" that "that the “slowest horse” would usually be the EPO" - which seems to this Kat not be be an assumption but a fact borne out by many years of experience).

Many practitioners assumed (correctly) that the Court of Appeal would have to revisit the "Glaxo" guidance, but were concerned what the new guidance would be, in the light of Lord Sumption's critical comments of the previous practice.  Many feared that stays would become the norm, or perhaps even mandatory, resulting in the situation that justice would be delayed (and justice delayed, is, as the saying goes, justice denied).

Against this background, Floyd LJ's elegant and nuanced decision is most welcome.  The stay was not granted in the particular circumstances under consideration, apparently influenced by the offer to repay damages in the event that the patent is subsequently revoked in EPO proceedings. But of more general application are the revised general guidelines, which will control subsequent cases.  They are reproduced below, with comments in red as to their variation from the Glaxo approach.

“1.The discretion, which is very wide indeed, should be exercised to achieve the balance of justice between the parties having regard to all the relevant circumstances of the particular case.”
2. The discretion is of the Patents Court, not of the Court of Appeal. The Court of Appeal would not be justified in interfering with a first instance decision that accords with legal principle and has been reached by taking into account all the relevant, and only the relevant, circumstances.
3.  Although neither the EPC nor the 1977 Act contains express provisions relating to automatic or discretionary stay of proceedings in national courts, they provide the context and condition the exercise of the discretion.
4. It should thus be remembered that the possibility of concurrent proceedings contesting the validity of a patent granted by the EPO is inherent in the system established by the EPC. It should also be remembered that national courts exercise exclusive jurisdiction on infringement issues.   [Guidelines 1-4 are essentially unchanged] 
5. If there are no other factors, a stay of the national proceedings is the default option.  There is no purpose in pursuing two sets of proceedings simply because the Convention allows for it.  [This is substantially changed - previously stated (at "sixthly") there are no grounds for presuming that duplication of proceedings would be, without further reason, grounds for a stay.] 
6.  It is for the party resisting the grant of the stay to show why it should not be granted.  Ultimately it is a question of where the balance of justice lies. [This is also substantially changed - previously referred to “much weight” being given to the party resisting the stay as it is the best judge of its own interests. New guidelines put greater onus on party resisting stay] 
7. One important factor affecting the exercise of the discretion is the extent to which refusal of a stay will irrevocably deprive a party of any part of the benefit which the concurrent jurisdiction of the EPO and the national court is intended to confer.  Thus, if allowing the national court to proceed might allow the patentee to obtain monetary compensation which is not repayable if the patent is subsequently revoked, this would be a weighty factor in favour of the grant of a stay.  It may, however, be possible to mitigate the effect of this factor by the offer of suitable undertakings to repay. [This guidance is new]
8. The Patents Court judge is entitled to refuse a stay of the national proceedings where the evidence is that some commercial certainty would be achieved at a considerably earlier date in the case of the UK proceedings than in the EPO. It is true that it will not be possible to attain certainty everywhere until the EPO proceedings are finally resolved, but some certainty, sooner rather than later, and somewhere, such as in the UK, rather than nowhere, is, in general, preferable to continuing uncertainty everywhere.  [Essentially unchanged from previous guidelines at "seventhly"]
9. It is permissible to take account of the fact that resolution of the national proceedings, whilst not finally resolving everything, may, by deciding some important issues, promote settlement. [Also new - previous guidance does not mention settlement] 
10. An important factor affecting the discretion will be the length of time that it will take for the respective proceedings in the national court and in the EPO to reach a conclusion.   This is not an independent factor, but needs to be considered in conjunction with the prejudice which any party will suffer from the delay, and lack of certainty, and what the national proceedings can achieve in terms of certainty.  [First sentence essentially unchanged from previous guidelines at "fifthly".  Rest of paragraph is new – previous version (end of para. 5) refers to supplying “some certainty in the public interest and in the parties’ legitimate interests”, but does not refer to consideration of the prejudice which a party would suffer from the delay.]
11.  The public interest in dispelling the uncertainty surrounding the validity of monopoly rights conferred by the grant of a patent is also a factor to be considered.  [Essentially unchanged]
12. In weighing the balance it is material to take into account the risk of wasted costs, but this factor will normally be outweighed by commercial factors concerned with early resolution.
13. The hearing of an application for a stay is not to become a mini-trial of the various factors affecting its grant or refusal.  The parties’ assertions need to be examined critically, but at a relatively high level of generality.” [These last two paragraphs are also essentially unchanged]

Merpel cannot help noticing that there are a host of conflicting considerations in this guidance - as indeed in real life - and both she and the IPKat look forward to seeing how Patents Court judges apply them in practice to future cases.  Merpel is also trying to work out - but so far without much success - what factual situations would result in a different outcome under the Glaxo guidelines and the current guidance.  Any thoughts, dear readers?




11 comments:

Anonymous said...

Isn't para 8 irrelevant, now that the Unilin rule has been dispatched (by virtue of the other aspects of Virgin v Zodiac)?

Surely parties are only now going to get commercial certainty once the EPO has finished doing its business? Thus, when Floyd says: "[you can refuse a stay]...where the evidence is that some commercial certainty would be achieved at a considerably earlier date in the case of the UK proceedings than in the EPO.", this cannot ever be achieved, as the decision in the UK is always going to be trumped by the EPO.

Darren Smyth said...

In response to first anonymous above, if the UK proceedings result in a determination of non-infringement, or of invalidity of the patent, then commercial certainty is achieved immediately irrespective of the EPO proceedings. Only a finding of "valid and infringed" is contingent upon a later decision of the EPO. So Para 8 is not completely irrelevant.

Claire said...

In response to Darren, presumably subsequent claim amendments at the EPO could also lead to overturning of a UK invalidity finding because the UK patent would then have a different (perhaps narrower) claims.

Gordon Harris said...

It is rather surprising that " allowing the national court to proceed might allow the patentee to obtain monetary compensation which is not repayable" is only a "weighty factor". After Virgin v Zodiac it is, of course the decisive factor. It is inconceivable that a judge, or the Court of Appeal, would not grant a stay in circumstances where non-repayable monetary compensation might arise. That is precisely the "evil" which the Virgin case addresses (and quite rightly so)

Anonymous said...

Point taken. You are right, but only up to a point.

You say: "...if the UK proceedings result in a determination of non-infringement, or of invalidity of the patent, then commercial certainty is achieved immediately irrespective of the EPO proceedings."

I agree with the non-infringement part, but not with your comments in invalidity.

If the UK proceedings are now going to be contingent upon the EPO's final finding on validity, then commercial certainty is not achieved until you have that final EPO decision.

Imagine the following scenarios, where there is no stay of UK proceedings, and assuming that the EPO is slower than the UK:

(i) UK says patent valid and infringed, but then patent later revoked by EPO;
(ii) UK says patent valid and infringed, but then EPO confirms validity of patent;
(iii) UK says patent invalid but would have been infringed if valid, but then patent later upheld by EPO;
(iv) UK says patent invalid but would have been infringed if valid, but then patent finally held to be invalid by EPO also;
(v) UK says patent valid and not infringed, and then patent validity confirmed by EPO;
(vi) UK says patent valid and not infringed, and then patent later revoked by EPO.

Thus in scenarios (i), (ii), (iii) and (iv) we are all waiting for the EPO to finish its work. It is only in (v) and (vi) that commercial certainty is achieved.

Darren Smyth said...

Thank you for all comments.

I agree with Claire that claim amendments complicate things, and even more so if different amendments are offered in different proceedings (which is I think procedurally perfectly possible). In pointing out that Anon 1 had only addressed half the issue, I also simplified somewhat. Post-grant amendments make it all really complicated and a complete headache, and I don't think anyone has a good solution to this other than a stay.

Assuming Anon 1 and Anon 5 are the same person (or at least making the same point), I disagree with you as to the outcome in (iii). My understanding is still that if the patent is revoked in UK proceedings, rejection of an opposition later by the EPO does not reinstate the UK patent. So in situations (iii) and (iv) the final outcome does not depend on the EPO decision.

To Gordon Harris - I don't find it inconceivable, and my reading of Virgin is that it left open the issue of what happens after damages have been actually paid. So I am keeping an open mind on this. You may of course turn out to be completely correct.

Anonymous said...

Darren - yes Anon 1 and Anon 5 are the same person, and it's me again.

Regarding your last point: "Assuming Anon 1 and Anon 5 are the same person (or at least making the same point), I disagree with you as to the outcome in (iii). My understanding is still that if the patent is revoked in UK proceedings, rejection of an opposition later by the EPO does not reinstate the UK patent. So in situations (iii) and (iv) the final outcome does not depend on the EPO decision."

I am not so sure now.

That principle was clearly explained as being the law in the UK in Jacob's excellent judgment Unilin at the Court of Appeal. (Excellent insofar as the explanation of the law went, nothing more than that).

But now following Virgin v Zodiac, has Sumption thrown the baby out with the bathwater? I think there are good arguments to say that he has.

Gordon Harris said...

I really am at a loss to understand why everyone seems to be clinging to the wreckage of Unilin. However good the summary of the law may have been it was a bad decision and one which is rightly consigned to the dust bin of history. Floyd LJ seems to assume in IPCom that most oppositions fail. The statistics simply do not bear that out. Well over 65% result in revocation or amendment - both eventualities can lead to any damages inquiry ordered by an English court to be stopped or even, at its most extreme, for damages paid to be repaid. In those circumstances it is odd that any court would not stay proceedings, probably after the English court has dealt with infringment/validity, but before any costs were potentially wasted on a damages inquiry, given the 65%+ possibility that the patent will be revoked or amended by the EPO.

I do not understand the reference to babies and bathwater. What was good about Unilin? Certainty? Absolutely not, as Lord Sumption pointed out - the outcome can be at the whim of adventitious events. Also, as Sir Sydney Kentridge said in the leave hearing in Virgin v Zodiac, in any given case only about 50% of the businessmen involved want certainty. No one ahs ever said "Well, I have to pay a load of damages for infringement of a patent which may never have existed, but at least I am certain about it".

No...sorry, Unilin was bad law and good riddance to it. The Sumption/Neuberger combination got it right, as Lord Neuberger did when dissenting in Coflexip v Stolt all those years ago.

Anonymous said...

Darren,

As to your original question about whether the IPCom guidelines will result in a different outcome to the Glaxo guidelines, I would suggest that the answer is no.

However, I think that there remains scope for further judicial guidance on issues not addressed by IPCom which may give rise to a different result than Glaxo.

Both Sumption L and Floyd LJ observe that, where inconsistent decisions cannot be avoided, the procedural tools available to the Court should be used to avoid any injustice (see, for example, para. 51 of Floyd LJ's decision).

I suggest that, in practice, the most common injstice will arise out of patentees enforcing injunctions in relation to patents which are subsequently determined by the EPO to be invalid or only valid in an amended form. The effect of such enforcement would be that a competitor will have been precluded from the market and suffered (potentially considerable) loss. This, of course, is not an issue with which Floyd LJ had to grapple because IPCom was in the relatively unique position of not seeking an injunction.

If procedural tools are to be used to avoid such a potential injustice, then we could see courts asking for cross-undertakings as to damages (pending the outcome of opposition proceedings before the EPO) in return for granting injunctions.

This would be consistent with Floyd LJ's requirement that an undertaking to repay liquidated damages be given before any award. Indeed, it is a model adopted by Germany which (from afar) appears to work well. It is also analogous to interim injunctions and interim damages.

As to the comments above, if the suggestion is that Sumption L has opened the door to the EPO reinstating patents held to be invalid by national courts, I would beg to differ. This is not my reading, nor does it appear to be Floyd LJ's. Indeed, this would require a re-writing of the Patents Act 1977, something which is beyond even Sumption L's (admirably wide) powers.

A

Anonymous said...

The bathwater - the principle from Unilin that if you get hit for damages by the UK courts, and then the patent turns out to be invalid (or amended down) by the EPO, and you still have to pay up. Good riddance to that. Hurrah for Sumption and Neuberger.

The baby - the principle, which was discussed by Jacob in Unilin, that if the patent is revoked in the UK, it cannot then be re-instated by the EPO holding it valid.

My question is whether that second principle still holds following Virgin v Zodiac. The most recent posting from "A" (Tuesday, 26 November 2013 17:53:00 GMT) seems to suggest that this principle still holds, by virtue of the wording of PA 1977.

Any chance you can expand on your reasoning?

Anonymous said...

Here's the thought. Both the PA77 and the EPC provide for revocation of a patent ab initio. The PA77 grounds are broader than those of the EPO, and the British courts will consider different evidence under a different test. If the UK Courts determine that a patent is valid, Virgin tells us that a Decision of the EPO can nevertheless cause it never to have existed for the purposes of damage calculation: the ab initio effect of central revocation. The reverse situation is also straightforward: the EPO upholds, and then the Court later revokes. But there is nothing in UK law or the EPC that allows a patent to be reinstated once either a Court or the EPO has finally decided that it is invalid and to be revoked ab initio. That is what revocation ab initio means: it is deemed never to have granted. And that which never was, can not yet be. The law provides for two gunmen, and either can hit their mark. But neither can resurrect what the other has put down.

Now, the really interesting situation is that which arises once a British Court has held a patent valid in amended form, and then the EPO maintains the patent with different restrictions to an independent claim to those entered in the British proceedings. My instinct would tell me that Section 76(3) requires the UK patent to be amended to include the limitations accepted at the EPO on top of the limitations allowed by the Court. But I have not yet seen a decision on this point.

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