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Tuesday, 15 December 2015

Serving a patent infringement claim out of the jurisdiction? Mr Justice Birss' decision on Section 100 Patents Act 1977 may help!


A judgment on Section 100 of the Patents Act 1977 that
makes sense is as satisfying for the AmeriKat
as reaching those hard to reach "itch spots".  Ahhh....
How do you serve patent infringement proceedings on a Chinese company?  What on earth is Section 100 of the Patents Act 1977 all about?  If these questions have disrupted your days and haunted your nights, then fear not.  Your rescue may have just come in the form of Mr Justice Birss who, just this morning, handed down a decision in Magnesium Elektron v Molycorp [2015] EWHC 3596 dealing with both of these issues and granting permission to serve a patent infringement claim on the defendant based in China.

The Facts

The claimant - Magnesium Elektron Limited - makes and supplies rare earth mixed oxide (REMO) products, namely comprised of zirconium-cerium-based mixed oxides with rare earth oxides such as yttrium oxide.  These are made by the patented process as claimed in EP (UK) 1,444,036 entitled "Process for preparing zirconium-cerium-based mixed oxides".  All claims in the '036 patent are process claims.  Claim 1 states:
“A process for preparing zirconium-cerium-based mixed oxides which comprises reacting an alkali with an aqueous solution of a soluble zirconium salt containing 0.42-0.7 mole of sulphate anion (SO42–) per mole of zirconium cation at a temperature of not greater than 50°C, in the presence of a soluble cerium salt to form a cerium-zirconium mixed hydroxide, and then calcining the cerium-zirconium mixed hydroxide to form a mixed oxide.”
Molycorp Europe - the first defendant - is a UK company which supplies REMO products.  Zibo Jia Hua Advanced Material Resources Co. Ltd ("Zamr") based in Shandong, China, makes zirconium-cerium based mixed oxides in China.  Molycorp and Zamr are indirect subsidiaries of Molycorp Inc, a US company who petitioned for Chapter 11 bankruptcy in June 2015.  This has ruled Molycorp Inc out of the running for this application.

Magnesium Elektron argue that both of the defendants have infringed the patented process
  • by making REMO products in China;
  • by, with respect of Molycorp Europe, keeping, using, disposing of and offering to dispose of a product made directly by means of the patented process;
  • by, with respect of one or the other defendant, importing the product in the UK; and
  • by carrying the acts out pursuant to a common design and are therefore jointly liable for any acts of infringement committed by the other.
Magnesium Elektron issued and served proceedings against Molycorp Europe.  However, it needed the court's permission to serve a claim form on Zamr in China (referred to as "service out of the jurisdiction") and made an application to do so with out notice.  The application and evidence in support referred to the various "gateways" to service under Practice Direction 6B paragraph 3.1., but not to the underlying merits of the claim which the judge asked the claimant to consider.  In doing so, the claimant filed a witness statement of Mr Moles, an experienced chemist and technical director at the claimant.

The Law

There were three questions before the court as follows:

Question 1:  Is there a serious issue to be tried?

Whether or not there is a serious issue to be tried for the purpose of service out on the merits is the same test for resisting summary judgment (CPR 24) or strike out (CPR Part 3, Rule 3.4).  Because the claimant's patent is for a process, section 60(1)(c) of the Patents Act 1977 which relates to the infringement of a process invention, is at issue.  The questions are therefore whether Zamr has committed any relevant acts within the scope of section 60(1)(c) and whether such a product was made directly by the patented process.  

Cerium
In respect of the first question, the claimant argued that the consignment of Zamr's REMO product supplied by Molycorp Europe to a company in North Wales linked Zamr to the act of infringement in the UK when the goods arrived at Heathrow.  This was because, together with other documents, the goods were marked with a stamp from Zamr bearing the words "Import & Export".  There was therefore a serious issue to be tried as to the pleaded allegation that it was Zamr that committed the act of importation in the UK.  However, for service out of the jurisdiction, the claimant must also prove that there is a good arguable case that Zamr committed the act of importation in the UK in order to establish jurisdiction (this is a higher test).  Because there was no evidence as to whether Zamr, over and above Molycorp Europe, imported the goods into the UK this test was not satisfied. In relation to common design, the correct test was to adopt the "good arguable case" hurdle to ensure that foreign defendants are not brought unnecessarily into English proceedings (see Sandvik v Kennametal [2010], Canada Trust v Stolzenberg (No 2) [1998] and Napp v Asta [1999]).  The judge was satisfied, in line with the decision in Aubrey Max Sandman v Panasonic [1998], that evidence that Zamr's certificate of analysis (in English and Chinese) explained how the product matched the customer's specification was sufficient to support an inference that the product supplied by Zamr was tailored to meet the requirements of a customer in the UK.  The judge held that there was, therefore, a good arguable case that Zamr is liable as a joint tortfeasor.

In respect of the second question, the judge recognized that proving that the product was made using the patented process is difficult (see for example Nutrinova v Scanchem [2001] FSR 42).  The evidence of Mr Moles explained that the process at issue, called washcoating, could be identified by way of a chemical fingerprint.  This is because the patentee's REMO product obtained a unique nanostructure from the washcoating that provided enhanced oxygen release kinetics.  These features could be identified by various techniques which, when conducted in full, are quite an undertaking. The claimant therefore provided initial results which demonstrated that the sample from a trap purchase behaved almost identically to samples made by the patented process.   Accordingly, the judge accepted that there was a serious issue to be tried .

Of interest, the claimant also argued a second basis - that section 100 of the Patents Act 1977 applied.  Section 100 provides that
"100.— Burden of proof in certain cases. 
(1) If the invention for which a patent is granted is a process for obtaining a new product, the same product produced by a person other than the proprietor of the patent or a licensee of his shall, unless the contrary is proved, be taken in any proceedings to have been obtained by that process. 
(2) In considering whether a party has discharged the burden imposed upon him by this section, the court shall not require him to disclose any manufacturing or commercial secrets if it appears to the court that it would be unreasonable to do so."
Just like Section 100, Justice Ginsberg
is said to be "notorious".  For an explanation,
see this Rolling Stone article here.  
The claimant argued that because the trap purchase sample behaves almost identically to the samples made by the patented process, they are in relevant respects "the same product".  As Mr Justice Birss stated:
"27. If sections in the Patents Act could ever be described as notorious then this may be the one.  In Generics v Lundbeck [2006] EWCA Civ 1261 its interpretation was described as difficult (per Jacob LJ paragraph 8).  In Crystal Fibres v Fianum [2009] EWHC 2149 (Pat) it was described as difficult to construe and apparently quite narrow (per Floyd J as he then was, paragraph 24).  These are the only cases the claimant’s lawyers were able to find which addressed the section.  Neither of them had to address what the section actually means. 
28. It is clear that s100 was passed to give effect to Art 35 of the Community Patent Convention, which uses essentially the same language.  It is also reasonably clear that the section is supposed to meet the UK’s obligation to comply with Art 34(1) of TRIPS and, in that context, by complying with option (a) (see Art 34(2)).   
29. The key question of interpretation of s100 is - what is a process for obtaining new product?"
The answer?   The word "new" must mean the same as "novel" under the Patents Act 1977.  The product described in the process claim is at a level of generality that could never be said to be "new" and, indeed, isn't (e.g., the product being "zirconium-cerium-based mixed oxides").  What made the product "new" for the purposes of Section 100 was the unique fingerprint imparted to it by virtue of the patented process.  Such a product had not been made available to the public before.  Accordingly, the Zamr ReMO is the same product as the new product because it has the same characteristics as the patentee's product which make the product new - it has the same fingerprint.  

Question 2:  Is there a good arguable case that whichever of the gateways in PD 6B paragraph 3.1 are relied on by the claimant are satisfied?

Civil Procedure Rules gateways for service -
so much less exciting than the one in St Louis
To establish jurisdiction for serving a claim on a foreign defendant, the claimant must also establish a good arguable case that a "service out" gateway set out in Practice Direction 6B applies.  As alluded to above, this is a higher standard than a "serious issue to be tried".  The requirement's justification is that the party seeking to serve out of the jurisdiction must have a much better argument than the other party.  There are three gateways at issue (gateways being the term to describe the procedural pathway or gateway to serve proceedings on a foreign defendant):


  • The "injunction gateway" (6B 2.1(2)):  For this gateway to apply, a claim has to be made for an injunction ordering the defendant to do or refrain from an act in the jurisdiction.  The claimant has to establish that the injunction to restrain acts in the UK is a genuine aspect of the relief sought and there is a reasonable prospect of an injunction being granted.  Because an injunction restraining patent infringement is often the most important remedy sought, it is a genuine part of the relief claimed by the claimant.  Although the Patents Court always retains discretion whether to grant an injunction, "it is very rare for such an injunction to be refused altogether".  This gateway was satisfied.  
  • The "necessary and proper party" gateway (6B 3.1(3)):  For this gateway to apply, a claim has to be made against a defendant based in the jurisdiction (Molycorp Europe) in respect of a real issue (supply of Zamr's product in the UK) that is reasonable for the court to try (claim for patent infringement in the UK heard by the Patents Court) and that another party (Zamr) is a necessary and proper party to determine this claim.  In respect of  the final limb, the judge held that Zamr was a necessary and proper party as the claims against both defendants were inextricably linked:  "If both Zamr and Molycorp Europe had been within the jurisdiction, then they would both have been joined into a single action."  This gateway was satisfied.  
  • The "claim in tort" gateway (6B 3.1(9)(b)):  For this gateway to apply, a claim has to be made where the damage was caused by acts committed in the jurisdiction (or likely to).  In relation to the joint tortfesance claim, the acts committed in the UK which the claimant relies are acts of Molycorp for which Zamr is said to be joint liable.  This gateway was satisfied on this ground, but, in respect of importation, the judge concluded that "while there is a serious issue to be tried that Zamr was the importer and so has committed an act of within the jurisdiction, this is not a much better argument than the argument that Molycorp Europe imported the goods.  The material is not sufficient to satisfy a higher hurdle and I will not give leave under this gateway for that claim."  The judge also commented that 3.1(9)(a) would have also been satisfied on the basis that the  primary and direct damage caused by infringement of a UK patent is damage sustained in the UK as the UK patent is a territorial monopoly.  However, the claimant did not seek permission on this ground of the gateway.  

  • Question 3:  Is England and Wales is a proper place in which to bring the claim?

    Yes.  As the judge held "[t]he claim is for infringement of a UK patent, involving supply of goods to a company in Wales. The applicable law is English law.  Furthermore, if validity is put in issue (as one would expect in due course) then the case would be within the exclusive jurisdiction of the court."

    Practical considerations

    Unless your application for service out
    is supported with evidence,  your application
     will be "out of service".  Groan...
    There is nothing like a good procedural application to make the AmeriKat jump with excitement on an otherwise dull Tuesday morning.  So what are the take homes?  Here are a few that the AmeriKat considers may be worth remembering:
    • Don't forget expert or factual evidence addressing the underlying merits of the claim.  This evidence will help support whether there is a "serious issue to be tried" and whether the gateways are satisfied.  The claimant here did not provide the evidence until prompted by the judge, so worth bearing this in mind at the offset.  
    • Each element of the service out test relies heavily on the evidence.  Shipping forms, samples from trap purchases, certificates of analysis, conclusions from the patentee's technical director, etc were all probative in convincing the judge that the various grounds were met for service out.  Applicants need to ensure that they compile as much evidence tying foreign defendants to the jurisdiction as possible and, in respect of common design, documents that evidence that the foreign defendant is tailoring and targeting their acts to the UK are key.
    • For patent infringement proceedings, various gateways will apply, with the "injunction gateway" being your safest bet (depending on the facts).  In light of the judge's comments, do not forget 6B 3.1.a which also seems like an easy win.
    • Section 100, although notorious, may have greater applicability to process patents in light Mr Justice Birss' explanation.  However, evidence demonstrating the identity or shared characteristics between the patentee's product and the defendant's product will still be necessary.  

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