Flat Out Dismissal: Court of Appeal upholds Floyd J in Virgin Atlantic's flat-bed saga

No fudge from
Floyd, rules CA

Two years ago during the Olympics, the AmeriKat sat on her sofa with the door ajar, letting the cool summer breeze tickle her paws. It sounds tranquil, but she was in the midst of reading a beast of a judgment from Mr Justice Floyd (as he then was) in the ongoing Virgin Atlantic saga in Virgin Atlantic v Zodiac [2013] EWCA Civ 1713. Back then Mr Justice Floyd held that, of the three patents at issue, all were valid, two were not infringed, and one was infringed and a geeky non-designation point was dismissed (more on that below). 16 months, nine barristers and three law firms later, the Court of Appeal upheld Mr Justice Floyd’s decision in its entirety. But, more importantly, the AmeriKat has finally experienced a flatbed experience – thank you, American Airline Advantage miles – and now can fully appreciate what all the fuss is about (or was it the unlimited ice cream sundaes and champagne….?)

Mr Justice Floyd’s decision

For a refresher of Floyd J’s decision see the AmeriKat’s posts on the decision (here and here) which set out the background and procedural history of the matter. However, the AmeriKat provides you with a very birds-eye bullet-point summary as follows:

• Virgin alleged that three patents ('908, '711 and '734) were infringed by Contour’s Solar Eclipse seat and brought proceedings against Contour (now Zodiac) and some of its customers.

• The '908 patent was the focus of the proceedings (the points arising on the '711 patent were held to be material in all respects)

• The '908 patent related to the seating system for passenger aircraft in which seats, which convert into flat beds, are arranged in a space-saving “inward facing herringbone” configuration.

• The '908 patent was amended following opposition proceedings before the European Patent Office (EPO). 

Don't like flat beds? There are other options

• The main argument on infringement of the '908 patent was what element of the Solar Eclipse seat met the requirement for a triangular passenger support element. Floyd J held that the Solar Eclipse seat’s headrest did not meet this requirement because it was one of the movable passenger-bearing elements and that it was not disposed in the rearward space when the seat is in seat mode. The rear console located beneath the headrest also did not meet this requirement as it was not substantially coplanar with the passenger support elements and was beneath the movable passenger bearing elements. The same applied to the Variant Solar Eclipse headrest.

• The '734 patent was published after the sales of the Solar Eclipse and so Virgin’s claim were made quia timet and only for injunctive relief.

• Floyd J held that the '734 would be infringed as the patent did not possess the all-vital “passenger support element”.

Some people really need
a triangular headrest ...

• Contour recognized that an additional passenger support element positioned in the rearward space was an inventive advance over the cited prior art, so therefore did not challenge the inventiveness. However, the judge considered what would happen if he was wrong on construction: in such an eventuality, the patent would protect seats where there was no separate passenger support element and such a requirement could be met by a head rest. The obviousness attack in these circumstances was rooted in British Airways UK Patent Publication No 2 26 824A whereby the set, when reclined, would extend in to a triangular space between the back of the seat but resulting in a further gap between the headrest and the cabin wall. The Virgin Atlantic seats went further; the triangular headrest extended into the full space between the back of the seat and cabin wall. This, Floyd J held, would not have been obvious to the skilled addresses. Contour's obviousness attacks failed.

• The net result was that the '908 and '711 patents were not infringed by the Solar Eclipse seating system, the '734 patent would be infringed and none of the patents were invalid for added subject matter or for obviousness.

The Court of Appeal’s decision

Readers may be expecting a breakdown of what the Court of Appeal said on all these issues. The AmeriKat could entertain (or perhaps bore) some of you with details of their view, but it does not make for a very interesting read because they essentially agreed with Floyd J’s reasoning and upheld him on every point.

What was interesting was the point on non-designation of the '908 patent. That point was previously ignored by the AmeriKat in her reporting of Floyd J’s decision because, after seven hours of getting to grips with the judgment and distilling it into a post, reading anything that dealt with the Patent Rules 2007 was just a bit too much for her. However, it peaked her attention this time around as the defendants based their argument on the European Convention on Human Rights (ECHR). Here is the story:

When filing the parent application, Virgin designated all available Patent Cooperation Treaty (PCT) contracting states. It included a GB national application and an EP(UK) designation through the EPO. Virgin then filed the divisional application which would become the '908 patent. In form 1001E it kept the pre-checked box at 6-1 that states that all European Patent Convention (EPC) contract states are designated. The box at 6-4 stated that the applicant intended to pay designation fees for a list of more than 20 states which did not include the UK. Then a note at the bottom of the form stated that “GB is expressly NOT designated in this application”. The '908 application was published with designations including the UK, but Virgin then wrote to withdraw the UK designation and informed the United Kingdom Intellectual Property Office (UKIPO) that it would withdraw the UK designation prior to grant. But Virgin took no further steps to withdraw the patent. '908 was inevitably was granted and placed on the UKIPO patent register.

The Zodiac group ...

Premium, a former group company of Zodiac, had appealed a decision of the UKIPO in which the Hearing Officer at the UKIPO rejected Premium's application on the basis of Rule 50 of the Patent Rules 2007, which would have had the effect of correcting the register to remove the GB designation. This was because, in order to challenge the validity of the '908 patent, the Hearing Officer would be required to review the decision of the EPO to grant it with a UK designation and he had no such power under the UK Patents Act of 1977. The only way Premium could revoke the patent would be on the basis of Section 72 of the Patents Act 1977 which provides for the power to revoke patents on substantive grounds (novelty, inventive step, etc). Although there was no appeal from that part of the judge’s order, the defendants argued that '908 patent was a nullity in so far as it purported to designate the UK as part of the grant.

The question before the Court of Appeal was thus whether the process of examination and grant in the EPO was open to challenge in the British Courts.

When the '908 patent was granted and published in the European Patent Bulletin, it obtained legal status under section 77(1) of the Patents Act 1977. The only attack could therefore be on substantive grounds (section 74(3) and 72 of the Patents Act 1977 and Articles 52-57 EPC). This should be the end of the story and this was supported in Genetech Inc’s Patent [1989] RPC 147. In that case, the Court of Appeal held that the opening words of Section 72(1), which state that the court or a comptroller can revoke a patent “on (but only on)” a list of substantive grounds, are so robust that failure to comply with other requirements outside those listed substantive grounds for revocation cannot be considered an additional ground for attack. In order to get around this and advance a substantive challenge, the defendants argued that their Article 6 ECHR was breached. Article 6 provides that:

"In the determination of his civil rights and obligations … everyone is entitled to a fair and public hearing … before an independent and impartial tribunal established by law".

First, the defendants had to establish the court had jurisdiction under Article 1 ECHR. The Court’s decision on this was as follows:

• The European Patent Convention is an international convention which establishes a common system of law for the grant of patents in each of the contracting states. It exists independently of the EU and it is not a signatory to the European Convention of Human Rights (ECHR).

• As a matter of domestic law, courts will not consider themselves competent to adjudicate upon rights and obligations which arise out of transactions entered between sovereign states, i.e. a refusal to challenge the exercise of the Royal Prerogative to make treaties.

• The UK as a contracting state did not have any “de facto involvement or responsibility for the examination or grant process of the '908 patent. That is entirely a matter for the EPO which is both factually and legally independent of the Comptroller and the UKIPO in the exercise of its grant-making powers. It employs its own staff; it has it own Boards of Appeal chaired by a legally qualified chairman; and the patents it grants have under Articles 2(2) and 64(1) of EPC 2000 authoritative effect in the designated contracting states without any further action or adjudication by the Comptroller. Section 77(1) of the 1977 Act makes European patents directly effective in domestic law from the date of publication in the European Patent Bulletin. The Comptroller's function is purely administrative.” (para 154)

• The mere fact that the powers of the EPO derive from a surrender of UK sovereign power under the EPC is insufficient to create jurisdiction under Article 1 ECHR:

“To allow the English courts to have a general power to review the validity of grants on grounds not specified in the EPC would be to undermine fatally the whole system for the grant of European patents and would constitute a breach of the UK's treaty obligations under the EPC. Although the Strasbourg jurisprudence establishes that the UK cannot escape the consequences of its own breaches of the Convention by relying on its own international obligations, the cases relied on by Mr Saini do not establish that any actions by an independent body such as the EPO which might be regarded as non-Convention compliant can be visited on the contracting states solely on the basis that they are required to give legal recognition to what it has done.” (para 155)

Secondly, if the court was wrong and the British Courts did have jurisdiction, the defendants would then have to prove that their Article 6 rights were breached. The Court of Appeal was faced with the difficult question of whether the EPO’s denial of a remedy for incorrect designation and Floyd J’s refusal to allow the issue of designation to be raised in any form of domestic proceedings engaged Article 6 because it denied the defendants from a hearing of a ground of opposition to the ‘908 patent. To win on this the defendants would have to show that (i) they had a right to a fair hearing of their case on non-designation and (ii) they had a legal right to raise that issue as a basis for challenging the '908 patent’s validity in the UK. The Court of Appeal held thus:

On Article 6, the position of the English court is that that Article does not itself create powers of adjudication or other substantives rights which the parties do not enjoy under domestic law:

“[A]rticle 6 forbids a contracting state from denying individuals the benefit of its powers of adjudication; it does not extend the scope of those powers.” (see Holland v Lampen-Wolfe [2000] 1 WLR 1573 and Jones v Ministry of the Interior of Saudi Arabia [2007] 1 AC 270)

The defendants had no substantive right of challenge of the designation under domestic law by virtue of sections 72 and 74 of the Patents Act 1977 and the principle not to challenge the exercise of a Royal Prerogative. The only right they had under domestic law and which was protected by Article 6 ECHR was the right to argue whether their designation argument was justiciable (see paragraph 172 of the decision).  Although annoying for parties, the court held that it was “inherent in the scheme of the EPC that some errors, even if detected, will not be open to correction at the suit of a third party” . Paragraph 170 continues:

“Insofar as they take place as part of the examination of the patent application, they are essentially administrative matters which are not open to challenge at the suit of a third party and lie procedurally outside the scope of Article 6 of the ECHR: see X v Austria (Application 7830/77). Even if the errors go arguably to jurisdiction, the exclusion of a right to challenge the validity of the patent on those grounds can be justified in terms of the need for legal certainty. Absent a challenge on grounds of patentability, the patent will be placed on the register and both the patentee and third parties may alter their economic position in reliance on it. They are entitled to do so on the basis that Article 100 of the EPC establishes an exhaustive code for determining its validity.”

Conclusion

So has the EPO emerged form this attack stronger than ever? Well, yes (in some respects) and that is no bad thing for legal certainty and for patent owners. Once a patent has been granted by the EPO, it is seemingly immune from attack on procedural grounds (but not on substantive grounds under Section 72) before the British courts.

Besides the 0-0 draw on the substantive challenges to the patent, you would be forgiven in thinking this decision was a success for Virgin (and patent owners) – not least because the Court of Appeal seemingly devoted more analysis and space to the designation issue. But, it is all a matter of perspective. According to Wragge & Co (who acted for the defendants), this decision was ‘another nail in the coffin’ for Virgin. According to DLA Piper, (lawyers for Virgin) it is Virgin who “retains the more financially important protection that the '734 patent provides, which prevents Zodiac manufacturing or selling the Solar Eclipse seat in the UK”.

With both parties appealing the decision of Floyd J and the status quo being maintained after the Court of Appeal, the AmeriKat cannot be sure either party can jump too high about their respective “successes”. The deciding factor may come down to costs. Merpel considers that whoever does not have to pay the costs in arguing the breach of Article 6 ECHR is the winner on that front. The AmeriKat thinks, however, there can be only be losers in that respect as surely whichever poor lawyer or costs draftsman that has to put together a costs schedule on all these Virgin outings ["And whatever poor judge has to hear it!", chimes the IPKat] has some good grounds for arguing a breach of their Article 8 rights.