AIPPI Seminar Report: Res judicata and the importance of Icelandic volcanoes in patent proceedings

The AmeriKat keeping her angry eyes on
while others re-lived
2013's year of res judicata

Several months after the Supreme Court's towering decision in Virgin v Zodiac [2013] UKSC 46 (see IPKat posts here), those at the heart of the dispute gathered to amaze and awe the audience at the first AIPPI seminar event of the season with their knowledge of all things res judicata. The AmeriKat was too busy being angry about the Commission's response to a question on the UPC to attend, but one of her wonderful colleagues, Steven Baldwin (Allen & Overy LLP), attended. Steven reports as follows: 

 "On Tuesday evening, members of AIPPI gathered to hear a panel discussion entitled “Re-writing Res Judicata – the effect on stays for EPO Oppositions” which centred around the long-running saga of Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46. And who better to take part in this discussion than Gordon Harris (Head of Intellectual Property at Wragge & Co – Zodiac’s solicitors), Henry Carr QC (leading counsel for Zodiac in the Supreme Court) and Richard Miller QC (leading counsel for Coflexip in Coflexip SA v Stolt Offshore MS Ltd (No.2) [2004] EWCA Civ 213, one of the cases expressly overruled by the Supreme Court in Virgin).  

For those of you unfamiliar with the facts, this case involves infringement proceedings brought by Virgin based on a European patent for a “seating system and passenger accommodation unit for a vehicle” which Zodiac’s “Solar Eclipse” airline seats allegedly infringed. Infringement proceedings were commenced against Zodiac in July 2007 and opposition proceedings were commenced by Zodiac at the EPO in February 2008. At first instance in the UK courts Virgin’s patent was held to be valid but not infringed. At the EPO the Opposition Division upheld the patent. Both decisions were appealed.  

By Boaworm (Own work) [CC-BY-3.0
(http://creativecommons.org/licenses/by/3.0)]
via Wikimedia Commons

At the Court of Appeal in October 2009, the patent was held to be both valid and infringed. Zodiac applied for a stay pending (i) an application for permission to appeal to the Supreme Court and (ii) the outcome of the EPO proceedings. In December 2009, the CA rejected this application for a stay. The Court relied on the doctrine of res judicata and in particular the CA decision in Unilin v Berry [2007] EWCA Civ 364.  

 To make matters worse for Zodiac, the TBA hearing planned for April 2010 was postponed until September 2010 due to the eruption of the airline industry’s favourite Icelandic volcano “Eyjafjalajökull”, by which time the Supreme Court had refused Zodiac leave to appeal on the merits of the Court of Appeal’s findings. Almost inevitably, the TBA held that Virgin’s patent was invalid by reason of prior art. Although the Court of Appeal subsequently discharged the injunction and order for delivery up originally ordered by them against Zodiac, the Court rejected Zodiac’s application to discharge the order for an enquiry as to damages on the basis that the earlier Court of Appeal's decision was res judicata. The Supreme Court granted leave to appeal on this point. The case was eventually heard by the Supreme Court in July 2013.  

 In the Supreme Court the Justices overruled the cases of Poulton v Adjustable Cover and Boiler Block Co [1908] 2 Ch 430, Unilin and Coflexip, thus turning its back on over 100 years of case law. However, this came as no surprise to many – the dissenting judge in Coflexip, Neuberger LJ (as he then was), was one of the judges that heard this appeal in the Supreme Court. The question for our panel was: did the Justices make the right decision and what impact would this decision have on patent law in practice?  

Is there no 'justice' in judicata,
Mr Miller QC?

 After Mr Harris had provided a review of the facts, he handed over to Richard Miller QC, who started by drawing attention to previous House of Lord decisions (Mulkerrin’s [2003] 1 WLR 1937 (HL); Vervaeke v Smith [1983] AC 145) in which the Court held that res judicata is a form of estoppel that should apply “even though the decision may be wrong”. He argued, contrary to the Supreme Court, that res judicata is not about justice but that instead the need for finality outweighs the problem of holding parties to a wrong decision, thus echoing Jacob LJ’s statement in Unilin that “businessmen want certainty”. Mr Miller QC also highlighted the uncertainty as to exactly when a Defendant will be able to rely on an order for revocation in a damages assessment given that Lord Neuberger’s stated that a Defendant will only be able to rely on such an order “absent special factors”, without then specifying what those factors may be. However, the issue which seemed to cause the most stir was Lord Neuberger’s observation that he would expect a court to normally agree to re-open a judgment on the assessment of damages, before it has been passed and entered, “if any revocation or amendment was raised” which had a bearing on that assessment. The feeling in the room was that the approach of the Supreme Court in this case effectively allows parties to have an indefinite number of ‘bites at the cherry’ if they are able to find third parties (such as a ‘gun-for-hire’ firm of lawyers or patent attorneys) willing to bring revocation actions in the UK on their behalf on the basis of new prior art (this point was also raised specifically by Mr Justice Arnold, a member of the audience) and that this would see the time taken for damages enquiries in the UK courts rise dramatically.  

The stars did not align for
Zodiac when the
volcano erupted, explained
Mr. Carr QC

Up then, stepped Henry Carr QC who, naturally, disagreed with Richard Miller QC’s opinion that res judicata is not about justice. On the contrary, Mr Carr QC stated that issue estoppel and abuse of process are “all about justice” and noted the courts’ attempts to restrict the scope of strict action estoppel in cases such as Arnold v National Westminster Bank plc [1991] 2 AC 93 precisely because it can lead to injustice. He also asked whether it could really be seen as right, in the name of finality, for a patentee to get £49 million for a patent that never existed (revocation being retrospective) and therefore cannot ever have been infringed. He then reminded the room that both he, and the Supreme Court, agreed that it could not. Mr Carr QC continued by pointing out that the Justices were heavily influence by the fact that, had the volcano not erupted when it did, Zodiac would have been able to rely on the TBA decision in their application for permission to appeal and the Supreme Court may not therefore have refused permission to appeal on the merits. Indeed, Lord Sumption stated in his judgment that patent law should depend on “more substantial and predictable considerations than these”.  

Finally Mr Carr QC moved on to discuss the effect of Virgin on stays, explaining that the Justices suggest that the UK courts should stay decisions pending the outcome of EPO decisions. He then referred to the guidance on stays provided by the Court of Appeal in the recent case of IPCOM v HTC [2013] EWCA Civ 1496 before concluding that it is still very hard to get a stay in the UK courts, particularly if the patentee is willing to give undertakings to repay any monetary compensation they receive for infringement of a patent which is subsequently revoked. 

The AmeriKat knows the meaning
of the AIPPI logo, but do you?  

For this author, Tuesday’s discussion left no doubt in his mind that this decision is problematic in a number of ways and that it may well have left the door open for an indefinite number of revocation actions to be brought against the same patent by various disinterested third parties motivated solely by financial gain. One might also question why a patentee would choose to litigate in a country where it is unclear to them whether a ‘final’ judgment is indeed final. That said, it is difficult to ignore the sentiments reflected in the following question put to Virgin’s counsel by Lady Hale during the Supreme Court hearing: 

 “How would you encapsulate, in a sentence, the injustice of depriving somebody of something that they should never have had”.

Until we are able to come up with an answer to this question which sufficiently satisfies the Supreme Court, it seems that, as regards res judicata, patentees may find themselves wading around in the murky bog of patent ‘justice’, desperately grasping for a sympathetic hand to pull them out, for some time to come."