In this Current Intelligence note, published in our latest issue, Brian Whitehead and Richard Kempner (Kempner & Partners LLP) analyse the recent decision of the High Court in AP Racing Limited v Alcon Components Limited. Mr. Justice Carr confirmed that the Patent Court's practice of allowing the introduction of further alleged infringements at the damages inquiry stage applies also to patent infringement actions pending before the IPEC. Alternatively, the claimant can commence new proceedings to deal with the further alleged infringements. Neither course of action will normally constitute an abuse of process. The authors also provide a very useful analysis of the practical and strategical significance of this decision for both claimants and defendants.
Introducing new alleged infringements after the trial on liability in patent cases
Brian Whitehead and Richard Kempner*Kempner & Partners LLPEmails: email@example.com and firstname.lastname@example.org
AP Racing Limited v Alcon Components Limited,  EWHC 815 (Ch), High Court of England and Wales, 4 March 2016
The High Court has confirmed that the Patents Court’s practice of allowing a claimant to introduce further alleged infringements at the damages inquiry is equally applicable to patent infringement actions in the Intellectual Property Enterprise Court. Alternatively, it is not an abuse of process to commence additional proceedings in relation to alleged infringements of which the claimant was not actually aware at the time of a first action, even if it could or should have been aware of them.Legal context
Patent infringement actions in the English Patents Court are normally heard in a split trial, in which issues of validity and infringement are considered at a first hearing and, following a finding of infringement of a valid patent, financial remedies are considered at a second hearing. Since Unilin Beheer BV v Berry Floor NV ( EWCA Civ 364;  FSR 25), it has been accepted practice in the Patents Court to raise further alleged infringements at the damages inquiry, at which point a determination is made on whether they fall within the scope of the patent. This appeal decision considers, in part, whether the same approach is permitted in the Intellectual Property Enterprise Court (‘IPEC’).
This case concerns AP Racing’s patent relating to an innovative design for a brake calliper. AP Racing commenced a first set of proceedings against Alcon in 2011 (‘First Action’), alleging patent infringement in relation to its manufacture and supply of callipers for the NASCAR market. Shortly after proceedings were commenced, AP Racing’s lawyers wrote to Alcon’s lawyers asking for information about other callipers, manufactured by Alcon for other motorsports applications, which potentially infringed the patent. Alcon declined to provide any such information. The claim proceeded to trial in the Patents County Court (the IPEC’s former name) and, following an appeal, the patent was held to be valid and infringed ( EWCA Civ 40).
During an inquiry as to damages, AP Racing discovered information about ten more potentially infringing callipers manufactured by Alcon. Although the claimant had not previously been aware of any of these additional callipers, it transpired that seven of the ten calipers had been displayed by Alcon, prior to the date of the Case Management Conference (‘CMC’) in the First Action, at trade shows also attended by AP Racing.
AP Racing suggested that these additional calipers (termed ‘the 7 Callipers in the judgment) should either be included in the inquiry, or alternatively should be the subject of a second set of infringement proceedings. Alcon did not agree to either proposal, contending that the claimant could have become aware of the 7 Callipers in time to include them in the First Action, if it had exercised reasonable diligence. Alcon argued that, in consequence, any action in respect of the 7 Callipers, whether by way of inclusion in the inquiry or by a second set of proceedings, would constitute an abuse of process.
AP Racing decided to confine the inquiry in the First Action to the NASCAR callipers that had specifically been pleaded and held to infringe, and commenced a second set of IPEC proceedings in relation to all ten further callipers ie including the 7 Callipers. Alcon applied to strike out the second claim insofar as it related to the 7 Callipers. The strike-out application was dismissed ( EWHC 1371 (IPEC)), and Alcon appealed that decision. In accordance with Table 1, s. III of CPR PD 52A, the appeal lay to the Chancery Division of the High Court rather than the Court of Appeal.Analysis
We summarize below the main points that arose in the appeal.
- Where a claimant has actual knowledge of facts which give rise to a future claim, but keeps those facts secret during a first action, a second action commenced by it after the conclusion of the first action is likely to constitute an abuse of process.
- However, there is no general duty on a claimant to exercise reasonable diligence to ascertain whether it has a potential further cause of action against a defendant (or third parties).
- In contrast, the knowledge of the defendant as to the likelihood that a subsequent claim may be brought against it, is a relevant factor when considering whether the bringing of such a subsequent claim is oppressive to that defendant. Where a defendant has chosen to keep quiet, particularly in the face of a request for information by the claimant, it is less likely that a subsequent claim constitutes an abuse of process.
- A claimant is not required to produce evidence of every possible infringement in the liability hearing, but should present sufficient examples so that the case of infringement can be dealt with in a cost-effective and expeditious way.
- The practice of permitting further alleged infringements to be considered at the inquiry stage is equally applicable to proceedings in the IPEC.
- In respect of the above point, Carr J disagreed with HHJ Hacon, who had held that whereas the second proceedings did not constitute an abuse of process, it is not automatically permissible to introduce new allegations of infringement at an inquiry in the IPEC. This is an important point, as it concerns the applicability of CPR Rule 63.23 to the situation. That rule states:
- At the first case management conference after those defendants who intend to file and serve a defence have done so, the court will identify the issues and decide whether to make an order in accordance with paragraph 29.1 of Practice Direction 63.
- Save in exceptional circumstances the court will not permit a party to submit material in addition to that ordered under paragraph (1).
- HHJ Hacon was of the view that, as the additional callipers had not been included in the CMC in relation to the liability stage of the First Action, the requirement laid down in Rule 63.23(2) would be satisfied only if the additional callipers could be considered ‘in reasonably short order and without any additional evidence’. Carr J disagreed, arguing that ‘it does not matter to the issue of abuse of process whether the issue of infringement in respect of the 7 Calipers will require one hour or half a day of court time’. His reason was that, in cases involving a split trial, there will be two CMCs—one at the liability stage and a second for the inquiry—and Rule 63.23 must be applied separately in respect of both CMCs.
- As an alternative to introducing further alleged infringements in the inquiry, a claimant may instead commence a second action in respect of the further alleged infringements, and that will not normally constitute an abuse of process.Practical significance
Commonly, when patent infringement proceedings are started, the claimant cannot be certain that it has identified all potential instances of infringement. In many cases, only the defendant will be fully aware of all potential infringements. In such circumstances, what is the best course of action for the parties?
In the authors’ view, although the AP Racing decision confirms that there is no legal duty on a claimant to exercise reasonable diligence, from a practical perspective it is best practice for the claimant to make all reasonable efforts to identify, as early as possible, all potential infringements. That is because taking action at a later stage is likely to lead to additional costs, in comparison with the position where all potential infringements are known and dealt with from the outset (for example, because a second set of proceedings will necessitate two sets of pleadings, two CMCs, two brief fees, etc).
What constitutes ‘reasonable efforts’ will be fact- and sector-specific, and may involve instructing investigators, monitoring the defendant’s activities at trade shows and other public events or simply asking the defendant for information (although as we explain in the next section there is no obligation for the defendant to respond to such requests).
It is not necessary, though, to include all potential infringements in the liability trial, and indeed it is clear from Carr J’s judgment that such a course of action is positively discouraged, particularly in the IPEC. Instead, the claimant should ‘lay its cards on the table’, and make clear to the defendant and the court, at the case management stage, all the potential infringements of which it is aware and its proposals in respect of them. Where there are a large number of potential infringements, for example, it may be appropriate for the parties to agree to select a representative range of examples for determination at the liability trial. Once these examples have been determined, the parties may be able to use them as guidance to determine the infringement question in relation to the other potential infringements. If that proves not to be possible, the court can then be asked to determine all outstanding infringement issues at the inquiry. None of this will be possible, though, if the claimant simply keeps quiet about the additional potential infringements, and it is clear from the case law considered by Carr J that adopting such a course of action may lead to subsequent proceedings being struck out as an abuse of process.
If the claimant only learns of the additional potential infringements at a stage when it is too late to seek the court’s directions at the liability stage (which, in the case of the IPEC, would be after the CMC in the liability stage has taken place), it has a choice. First, it can seek to include them in the damages inquiry. In this case, the claimant will need to be mindful that the length of the damages inquiry is limited to two days in the IPEC. Commonly, those two days will be fully occupied by matters relating to quantum, and it may not be possible to also consider additional infringement allegations in the inquiry. In such circumstances, it may (as recognized by Carr J) be possible to transfer the inquiry to the High Court, where a longer hearing can be held. Alternatively, the claimant can simply decide to commence new proceedings (as AP Racing did), and it is now clear that this choice will not normally constitute an abuse of process.
If the claimant asks for information on the defendant’s other potentially infringing products, there is no obligation on the defendant to provide such information. In deciding whether to do so, the defendant must weigh up and balance the risks. If the defendant provides the requested information, it may face infringement actions which would not otherwise have been brought, because the claimant may never have otherwise become aware of the additional potential infringements. If it keeps quiet, though, and the claimant does subsequently learn of additional infringements, that is likely to lead to the incursion of additional time and costs for the defendant, in comparison with the situation where those additional infringements were included in the first action. What is clear is that the defendant cannot ‘have its cake and eat it’—if it chooses to keep quiet, it cannot subsequently object to a second action as constituting an abuse of process.
* The authors acted for the Claimant/Respondent in this litigation.
© The Author(s) (2016). Published by Oxford University Press. All rights reserved.