Patents, damages, revocation and estoppel

The Court of Appeal for England and Wales (Lord Justice Mummery, Lady Justice Arden and Lord Justice Jacob) has given its ruling today in Unilin Beheer BV v Berry Floor NV, Information Management Consultancy Limited (t/a Responsive Designs and/or Tapis UK) and B&Q plc [2007] EWCA Civ 364. The question before the court is simple but utterly fundamental:

"If a patentee utterly prevails on infringement and validity and is held entitled to financial compensation in the Courts of England and Wales right up to the point where no further appeal lies, can all that be set at nought and utterly unravelled if the patent is later held invalid in the European Patent Office?"

In two senses the court's ruling is academic. First, after their Lord/Ladyships wrote their judgments but before they delivered them, the parties agreed to the preparation of a consent order. Secondly, the opposition proceedings that may result in the claimant's patents being declared invalid have not yet been concluded. Without going into the factual details of this dispute or the close legal reasoning arising from them (topics that other members of the IPKat team may choose to address later), this team member just wants to highlight a couple of the observations made by Jacob LJ, who gave the main judgment with which his colleagues concurred.

It is meaningless to decide the question on the basis of whether the national court or the EPO is "top dog". As Jacob LJ says (at para.26):

"Nor does it help to ask whether a national court or the EPO is "top". It all depends on the circumstances, as the two following scenarios illustrate:

(i) The patent is still under opposition when a national court holds it valid and the EPO then revokes. So the EPO is "top";

(ii) The EPO holds the patent valid and a national court subsequently revokes it (there is no estoppel created by an EPO decision as to validity, see Buehler v Chronos [1998] RPC 703). So the national court is "top."

In truth asking which tribunal is "top" is simply not helpful – there is just the untidy compromise inherent in the EPC and one which cannot be properly resolved unless and until a rational patent litigation system for Europe is created".

It is sensible to make a party pay damages for infringement even where the infringed patent is later held invalid. At paras 44 to 46 Jacob LJ says:

"Now a purist may say: it is a nonsense, and moreover an unjust nonsense, for a man to have to pay for doing what, with hindsight, we know to have been lawful. The purist might, I suppose, also say that a licensee who has paid royalties under a patent subsequently revoked ex tunc should get his money back. He might even say that a man who lost profits by refraining from some commercial activity by reason of a fear, now known to be groundless, of infringing the patent should have some remedy.

But I think there are good and pragmatic reasons why the purist approach makes bad business sense. You cannot unravel everything without creating uncertainty. And where a final decision has been made on a fair contest between the parties, that should stand as the final answer between them.

In a sense a patent is always potentially at risk – someone may come up with a bang-on but obscure piece of prior art (my favourite pretend example is an anticipation written in Sanskrit wrongly placed in the children's section of Alice Springs public library), or simply with better evidence on known prior art. That is no reason for undoing what has been done or regarding a final decision as merely provisional. After a final decision businessmen should be able to get on with their businesses, knowing what the position is".

This is very much a lawyer's analysis and the IPKat has some doubt as to whether a competition-minded economist [for it is they who rule the roost ...] would take the same view. Also, the Kat keeps re-reading Article 1 of Protocol 1 of the European Convention on Human Rights, which states:

"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties".

He is not a human rights lawyer and does not pretend to be, but he can't help speculating whether one's money is a protected possession, in the context of him being deprived of it for the sake of being made to pay damages to compensate a patent owner for infringing a right that should never have been granted in the first place.

Right: a litigant waves bye-bye to damages and costs -- he'll never see them again, even if patent he is held to infringe turns out to have been invalid all along.