Current Intelligence - Introducing new alleged infringements after the trial on liability in patent cases

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 LLP

Emails: whitehead@kempnerandpartners.com and kempner@kempnerandpartners.com 

AP Racing Limited v Alcon Components Limited, [2016] 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 ([2007] EWCA Civ 364; [2007] 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’). 

Facts 

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 ([2014] 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 ([2015] 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:

1. 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.

1. 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? 

Claimant’s perspective 

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. 

Defendant’s perspective 

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.

Application for central amendment of a patent after revocation at first instance does not of itself render an appeal an abuse of process

Author: Matthew Jones (EIP)

Samsung Electronics Co LTD v Apple Retail UK LTD & Another [2014] EWCA Civ 250, Court of Appeal, England and Wales, 11 March 2014

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu074, first published online: June 4, 2014

The Court of Appeal for England and Wales has ruled that an application for limitation (which is an application for central amendment) of a patent under the European Patent Convention 2000 (‘EPC 2000’), after a first-instance judgment revoking the patent but before the appeal in the matter has been heard, does not of itself render the appeal an abuse of process and can comprise reasonable grounds for a stay of the appeal process.

Legal context

Articles 105a, 105b and 105c of the European Patent Convention 2000 (‘EPC 2000’) provide for central amendment of European patents. Article 105a reads:

At the request of the proprietor, the European patent may be revoked or be limited by an amendment of the claims. The request shall be filed with the European Patent Office in accordance with the Implementing Regulations. It shall not be deemed to have been filed until the limitation or revocation fee has been paid.

The request may not be filed while opposition proceedings in respect of the European patent are pending.

Article 105b reads:

The European Patent Office shall examine whether the requirements laid down in the Implementing Regulations for limiting or revoking the European patent have been met.

If the European Patent Office considers that the request for limitation or revocation of the European patent meets these requirements, it shall decide to limit or revoke the European patent in accordance with the Implementing Regulations. Otherwise, it shall reject the request. 

 The decision to limit or revoke the European patent shall apply to the European patent in all the Contracting States in respect of which it has been granted. It shall take effect on the date on which the mention of the decision is published in the European Patent Bulletin.

Section 77(4) of the Patents Act 1977 (as amended) reads, insofar as is relevant:

Where a European patent (UK) is amended in accordance with the European Patent Convention, the amendment shall have effect for the purposes of Parts I and III of this Act as if the specification of the patent had been amended under this Act.

Facts and analysis

As part of the global battle between Apple and Samsung, Samsung claimed that Apple had infringed several of its patents in the UK. In the first-instance judgment in March 2013, Floyd J found that the relevant patents were invalid. In November 2013 Samsung applied to amend the patents centrally at the European Patent Office (EPO). The amendments requested by Samsung did not correspond to any pre-existing claim, or to any of the amendments requested at first-instance trial in the UK.

Samsung argued that the central amendment application would be determined in a relatively short time, and that the UK appeal on the substantive issues should be stayed until the application for central amendment had run its course and the final form of the claims was known. Apple argued that, if the central amendment application were allowed, it would necessitate remission of the case for retrial, which would amount to an abuse of process. Apple cited UK case law, specifically Nikken Kosakusho Works v Pioneer Trading Co [2005] EWCA Civ 906, which held that post-trial applications to amend a patent in the UK should be refused. Accordingly, Apple sought an order that the UK appeal should be struck out unless Samsung withdrew its central amendment application.

The Court of Appeal found in favour of Samsung, ruling that the appeal on the substantive issues should not be struck out and, rather, that the appeal should be stayed pending the outcome of the central amendment application.

The appellate judges pointed out that the Patents Act 1977 specifically contemplates parallel proceedings in the UK and the EPO. In connection with this, they cited the UK Supreme Court decision in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46. In that case, a European patent was found valid and infringed in the UK but the relevant claims were subsequently held invalid in opposition proceedings at the EPO, and the Supreme Court held that an infringer in the UK should be entitled to rely on retrospective revocation or amendment in the EPO.

The appellate judges also referred to the decision of the Supreme Court of the Netherlands (First Chamber) in Case No C07.085HR, Boston Scientific Scimed Inc v Medinol Ltd (6 March 2009), in which the Dutch Supreme Court decided to remit a case to the lower court in circumstances analogous to those in the present case between Apple and Samsung. The Court of Appeal emphasized that they were not bound by the Dutch decision, but did say that the decisions of the Dutch court must be accorded considerable respect.

The Court of Appeal accepted that the amendment application was likely to be heard in a relatively short time and that, absent a stay of the appeal proceedings, there was a real possibility that the appeal would be heard on a false basis, ie on the basis of claims that might be deemed never to have existed. The court therefore decided to grant the stay of the appeal proceedings pending determination of the central amendment application.

The court also refused to strike out the appeal. While it accepted that an application to the UK courts to amend the patent post-trial would likely have been struck out under the principles established in Nikken, it reiterated that it did not consider a central application to amend to be an abuse of process for reasons already discussed: the amendments sought by Samsung would have effect in every designated state. Further, whether reliance on a centrally amended patent before the court in England and Wales constituted an abuse of process depended upon whether or not it necessitated a retrial, which in the present application was not clear (at least, not yet).

Finally, the court pointed out that, while it could not say at this stage whether the central amendment proceedings rendered the appeal proceedings in the UK an abuse of process, Apple will have the right to make such submissions once the outcome of the central amendment application is known.

Practical significance

This judgment makes clear that the Court of Appeal will not regard an application for central amendment after first-instance judgment as an abuse of process in itself, or as necessarily rendering the appeal an abuse of process. However, it remains uncertain whether Samsung's actions will turn out to have been abusive in view of the claims that come out of the central amendment process and, in particular, in view of whether those claims will necessitate remission of the case for retrial. In theory, it could be that Samsung finds itself in an impossible situation where either (a) the application for central amendment will not result in claims which necessitate a retrial, in which case those claims be of little assistance over and above those which were held invalid at first instance in the UK, or (b) the application will result in claims which do necessitate a retrial, in which case the appeal itself may well be held abusive. Also, this case emphasizes the respect that British judges have for decisions of their Dutch brethren, which in turn emphasizes (if it needed emphasis) the value of obtaining positive decisions in one jurisdiction with respect to parallel litigation in another.

Firecraft: the danger of estoppel following Trade Mark Registry proceedings

Authors: David Cran and Georgia Warren (Reynolds Porter Chamberlain)

Evans and another (t/a Firecraft) v Focal Point Fires plc [2009] EWHC 2784 (Ch), 10 November 2009

Citation: Journal of Intellectual Property Law & Practice, doi:10.1093/jiplp/jpp237

The High Court granted summary judgment to the claimants in a passing off case because an earlier Intellectual Property Office (IPO) decision that the same claimants had an actionable claim for passing off against the same defendant, a decision which resulted in the invalidation of the defendant's trade mark under section 5(4)(a) of the Trade Marks Act 1994.

Legal Context

By section 5(4)(a) of the Trade Marks Act 1994 (‘TMA’), a trade mark shall not be registered if its use in the UK is ‘liable to be prevented by virtue of any rule of law (in particular, the law of passing off) protecting an unregistered trade mark or other sign used in the course of trade’.

The elements that must be proved to demonstrate passing off are:

* Goodwill attached to the relevant goods or services;
* A misrepresentation by the defendant to the public (whether or not intentional), for example one that leads, or is likely to lead, the public to believe that the goods or services offered by him were those of the claimant; and
* Damage to the claimant, for example, arising from the erroneous belief (caused by the defendant's misrepresentation) that the source of the defendant's goods or services is the same as the source of those offered by the claimant.

Cause of action estoppel applies where litigation has occurred previously in respect of the same subject matter, and was subject to a final and conclusive judgment. It prevents a party to that previous litigation from re-litigating the same claim.

Issue estoppel applies where a particular issue has previously been litigated and decided by a court as a necessary issue. If that same issue is relevant to subsequent proceedings between the same parties, it cannot subsequently be reopened for judgment.

Hormel Foods Corporation v Antilles Landscape Investments NV [2005] EWHC 13 (Ch) established that a person is barred by cause of action estoppel from attacking the validity of a trade mark in the High Court where that person had previously unsuccessfully attacked the mark before the IPO.

However, the Court of Appeal in Special Effects Limited v L'Oréal SA and L'Oréal (UK) Limited [2007] EWCA Civ 1 allowed a defendant to counterclaim for the invalidity of a trade mark in infringement proceedings despite having been unsuccessful in opposition proceedings in the registry, on the basis that there was no cause of action or issue estoppel.

Facts

Since 1991 the claimants had traded throughout England and Scotland in the manufacture, sale, and installation of stone fireplaces under the name ‘Firecraft’.

The defendant, Focal Point Fires plc, was a leading manufacturer of gas fires in the UK, making gas and electric fires since 1993. Around 2000, the defendant started to supply its fire range under the brand name ‘Firecraft’, having first instructed trade mark attorneys to establish whether it could use the name. The trade mark search came back clear and the defendant applied to register ‘Firecraft’ for various goods in class 11 including ‘gas fires; electric fires; fires simulating fuel effect’ in February 2000. The mark was registered on 1 September 2000.

The claimants claimed that they were not aware of the defendant's use of ‘Firecraft’ until May 2006. A request for invalidation of the defendant's trade mark was filed with the UK Intellectual Property Office (‘IPO’) in May 2007.

In November 2008 the claimants' invalidation application (on the basis of section 5(4)(a) of the TMA) came before an IPO hearing officer. The claimants successfully argued that they had an actionable claim for passing off against the defendants in relation to the ‘Firecraft’ mark as at the trade mark application date. As a result, the IPO held that the defendant's trade mark was invalid under section 5(4)(a). While the defendant did not appeal, neither did it stop trading under the ‘Firecraft’ name.

In March 2009 the claimants applied to the High Court for summary judgment on a claim for passing off against the defendant. The claimants argued that they were entitled to summary judgment as the IPO decision had established the defendant's primary liability for passing off. The claimants also argued that the defendant could not challenge the decision due to issue estoppel, cause of action estoppel, and/or abuse of process. As a result, the claimants submitted that all that the High Court needed to determine was the remedy to be granted (as the IPO hearing officer did not have the power to do so).

Analysis

The judge, Peter Smith J, agreed with the claimants' arguments that they were entitled to summary judgment on the basis of the IPO hearing officer's decision. He also agreed that the defendant was not able to challenge the decision due to cause of action and issue estoppel and because it would be an abuse of process.

As the judge noted, the claimants could choose to challenge the validity of the trade mark either before the IPO or in the High Court. However, the claimants' reliance on the IPO decision limited its choice of remedy as the IPO did not have the jurisdiction to grant an injunction or award damages. Consequently, the claimants only sought a declaration from the Court, rather than an injunction or damages. The judge noted that these matters remained open.

Even though the IPO decision concerned the existence of a cause of action for passing off 9 years earlier, at the time of the trade mark application, it did not follow that the claimants did not still have such a cause of action. Indeed, if there had been a sustainable argument on this point at the time of the IPO hearing, the defendant would have run it. The IPO would not have found the mark to be invalid if there was no continuing breach.

Cause of action estoppel
The judge rejected the defendant's argument that the IPO had only come to a decision on the validity of the trade mark and not in relation to establishing a cause of action in passing off. Clearly, the IPO could not have found that the trade mark was invalid under section 5(4)(a) without also establishing that a cause of action for passing off subsisted. In order to demonstrate this, the claimants would have had to adduce satisfactory evidence to demonstrate each of the three elements of passing off.

Issue estoppel
The defendant argued that the IPO was not a court of competent jurisdiction in relation to the relevant issues: its role was to manage the trade mark register and to adjudicate on any disputes arising from it. This being so, the defendant was not estopped from arguing passing off before the High Court. The judge disagreed. The IPO had determined whether the trade mark registration was invalid. To do so, it had to establish a subsisting cause of action for passing off as at the trade mark registration date. This was central to the IPO proceedings.

The defendant also argued that there could be no res judicata in a changing situation. Again the judge disagreed. The IPO had had to decide whether damage was likely to be caused to the claimants by passing off, which was akin to a quia timet test (a quia timet injunction restrains wrongful acts which are threatened or imminent but have not yet commenced). The IPO not only supported quia timet but also found damage to the claimants' goodwill at the trade mark application date. If the defendant had been able to demonstrate in the subsequent action that the circumstances had changed (eg the claimants had ceased trading), that would have been relevant. However, it appeared that they had not.

Abuse of process
The judge stated that the defendant's decision to provide limited evidence in relation to the IPO invalidity proceedings with a view to producing ‘better evidence’ in the High Court should be categorized as an abuse of process. Costs recovery in successful IPO proceedings was limited and the claimants had incurred substantial costs in establishing a passing off claim that they would not recover. The claimants should not incur further costs to demonstrate this again before the High Court. Further, it was open to the defendant to appeal the IPO decision in order to adduce further evidence, but it chose not to do so.

While the IPO registrar was powerless to prevent the further use of the mark by the defendant or to make an order for damages, the declaration as to invalidity meant that the defendant no longer had a mark which it could enforce against others. The defendant had underplayed the significance of the IPO decision.

The judge considered the two authorities on this area, Hormel and Special Effects. Special Effects made the position clear regarding opposition proceedings, but that did not arise here. Hormel dealt with an unsuccessful challenge to validity. The judge held that the converse of that judgment was equally true. It could not be right to allow a defendant to seek to re-run a successful adverse decision on validity against it.

Practical Significance

This decision highlights the possibility that, if a claimant succeeds in invalidity proceedings before the IPO, it can use that invalidity declaration to obtain relief in the High Court without the need for further evidence. In other words, it can opt for the cheaper route to establish passing off and obtain relief. However, it should be borne in mind that these claimants only obtained a declaration. While the option to seek an injunction and damages remained open to them, they would need to establish before the court that they should be awarded in the circumstances.

It is understandable that the defendant in this case believed the IPO proceedings dealt with the issue of invalidity only and so decided not to adduce extensive evidence on the passing off point. However, this case is a warning not to underestimate IPO proceedings and to submit all relevant evidence in support of your case as courts will ensure that parties that have had the opportunity to put their case before the IPO do not get a ‘second bite of the cherry’ in court. The case of Hormel suggests that this approach is not limited to passing off cases but may also apply in other circumstances where, having brought proceedings before the IPO, parties then look to bring a court action.