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?