UK: William Hill Loses Gamble with Internet Patent

Yesterday, in the case of Menasche Business Mercantile Ltd & anr v William Hill Organisation Ltd, the Court of Appeal gave a judgment that is of importance in cases where a patent can be implemented over the internet. It held that in such cases it was not a defence to patent infringement proceedings, under section 60(2) of the Patents Act 1977, for the supply of means to put the invention into effect, merely to show that the host computer which formed part of the patented invention was located outside the United Kingdom.

Menasche hold a UK patent for a gaming system comprising of a host computer that is interconnected with at least one remote terminal computer, together with software that enables the end users on the terminal computers to engage in interactive gaming. William Hill began operating a similar gaming system by supplying a program to its UK punters, usually by CD, which enabled their computers to act as terminals via the internet for another host computer. However, the William Hill host computer was located abroad in Antigua or Curacao.

William Hill alleged that the Menasche patent was invalid, but both parties agreed to the trial of the preliminary issue whether the fact that the host computer was located outside the UK provided a defence to infringement. Menasche argued that by providing the software to their punters, William Hill had, contrary to section 60(2) of the Patents Act 1977, supplied people who were not entitled to use the patented invention with means (that is the CDs) relating to an essential element of the invention for putting the invention into effect in the UK. However, William Hill argued that because the essential host computer element of their system was not situated physically in the United Kingdom the CDs were not supplied so as to put the invention into effect in the United Kingdom (but in Antigua instead).

At first instance, Jacob J decided that there was infringement, because the use of the William Hill host computer was such as to have an effect within, or on, the UK. This he held was sufficient for infringement even if there was no use of the invention in the UK.

The Court of Appeal upheld Jacob J’s decision, but for different reasons. It held that merely requiring the means supplied to have an ‘effect’ in the UK, was not the correct interpretation of the Act, because such an effect would be broad enough to include economic, physical or even emotional factors. Instead, the invention had to be put into effect in the UK, in the sense of being operational, or used, within the UK.

However, this did not mean that William Hill had a defence to infringement. Recognising the importance of the case in ‘the age that we live in’, their Lord Justices’ reasoned that the physical location of the host computer was immaterial. It was the input and output of information from the host computer that was relevant. By using their terminals in the UK, the William Hill punters were in a real sense also using the host computer in the UK. In other words, William Hill were supplying the means for putting the host computer into effect in the UK, as well as the rest of their system, by providing the CDs. Consequently they infringed.

If such a system could escape infringement in the UK simply because an essential element of that system was physically located abroad, even though the real practical effect of that element was manifest in the United Kingdom, this would have resulted (in the words of Jacob J) in an "enormous Gap" in UK patent protection. The Court of Appeal’s judgment fills that gap, albeit in a different way to that proposed by the first instance judge. This decision will therefore be welcomed by all patent holders in the communications and computer field, where systems often work across borders.

© Herbert Smith 2002

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