UK: Incompetence Is Expensive - Salutary Lessons From The English Courts

Last Updated: 13 October 2009
Article by Jacqueline Needle

Two recent cases from the English courts provide timely reminders of the need for advisors not only to be competent, but also to have the relevant skills and expertise.

In one case, an ineptly drafted licence agreement led to the parties expending large costs on rounds of litigation, and probably encouraged Oxonica to try to avoid their commitments in the first instance.

A German company Riesmer had to pay damages for unjustified threats issued on their behalf by German patent attorneys clearly unaware of the threats provisions under English law.

Ineptly drafted agreement

In Oxonica v Neuftec [2009] EWCA Civ 668, the Court of Appeal had to wrestle with a licence agreement which had clearly been drafted by someone with no understanding of patents.

Neuftec had know-how about fuel additives and applied for a patent by way of the PCT. As it thought that delivery should be by way of nanoparticles it entered into licence agreements, in respect of both patents and know-how, with Oxonica who had expertise in nanoparticles. The PCT application as filed had claims which were broader than those of some of the patents which were granted. Oxonica developed a commercial product which was within the scope of both the broad claim in the PCT application and of the European patent claim as granted. It sourced this product from third parties, sold it and paid royalties under the agreement to Neuftec.

However, Oxonica then found a supplier of a different product, which, although remaining within the scope of the claims of the PCT application, was outside the scope of the European granted claims. Oxonica contended that they no longer needed to pay royalties.

In both the High Court and the Appeal Court it was ruled that the agreement should be interpreted in a manner which required Oxonica to pay royalties.

In the Court of Appeal, Jacob LJ thought that the exercise of construing a contract "is of course made all the more difficult if it is apparent to the reader that the draftsman of the document was inept or did not fully understand the legal background – as was the case here."

Unjustified Threats

Zeno, a hand held device for treating acne by applying heat locally was found by a judgment of the High Court, Zeno v BSM-Bionic and Riemser [2009] EWHC 1829 (Pat), not to infringe claims of European patent (UK) No. 1231875 of Riemser. The Zeno device had a two and a half minute treatment cycle and operated at a temperature of about 47°C. Claim 1 of the patent was to a device for the local thermal treatment of insect stings and insect bites, having a treatment plate heatable to a temperature in the range between 50°C and 65°C which was maintained at that temperature for a maximum duration of 12 seconds.

On the facts of the case the patent was found to be neither anticipated nor obvious.

The action had been started as one to restrain unjustified threats in response to a letter sent by Riemser's German patent attorneys to a number of Boots stores who were stocking the Zeno device. The letter identified the patent and then said

"Our client has now found out that your company offers in the United Kingdom under the trademark Zeno a medical device for the treatment of acne which is also based on the principle of the application of heat over a specific period of time..."

"Up to this point we cannot see any difference to the technical solution for which our client was granted protection, all the more so since the temperature range is also within the limits of the range that is protected by the patent, and the patent discloses a lower limit in respect of the period of time."

"For this reason, we should like to request you to let us know why you are of the opinion that you need not take into consideration the patent of our client when marketing the product Zeno."

The judge noted that although the letter did not mention proceedings or explicitly threaten them, the purpose of the letters, given that they were sent to the retailers, must have been to persuade them to stop selling the Zeno device. In fact, it had some success in that Boots did stop ordering Zeno, although they were subsequently persuaded to reorder. Lewison J concluded that,

"It is not a question of how Boots understood the letter; but how a reasonable person in the position of Boots would have understood it. Read in context, through the eyes of a retailer, the letter amounted, in my judgment, to a veiled threat of infringement proceedings."

Therefore he found Riemser liable for unjustified threats.

The German patent attorneys were not aware that UK patent law, outlaws the issuing of threats, and that very great care needs to be taken before approaching retailers and other secondary infringers. Unfortunately the German attorney's ignorance of English law exposed their clients to the award of damages against them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Jacqueline Needle
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