Awards Of Damages In UK Patent Cases Will Prevail Notwithstanding The Findings Of EPO

The Court of Appeal has ruled that where a UK patent is litigated upon for infringement and damages are payable this position is unaffected by a subsequent finding that the patent is invalid by the European Patent Office ("EPO"). Furthermore, the court refused to overturn the Patent County Courts ("PCC") refusal to order a stay in proceedings in anticipation of an imminent EPO ruling. The decision brings to the patentee greater certainty, firstly that the UK court will more likely make a ruling without waiting for the EPO, and secondly that the UK courts’ order for damages will not be overridden by a subsequent EPO ruling possibly a number of years in the future. There are also wider implications on the patentee’s choice of jurisdiction in which to bring a claim for infringement.

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Patents can be granted nationally by the National Patent Office or can be granted to take effect in a number of European jurisdictions by the EPO. After the EPO grants a patent, a nine-month period begins in which an applicant may challenge the patent and seek to have it revoked by the Opposition Division of the EPO. Whilst any such application for revocation must be received within the nine-month period, it may take several years for the notoriously slow EPO to come to a conclusion as to whether or not to invalidate the patent.

Infringement proceedings or an action to have a national patent revoked may be brought in the national courts as soon as the patent is granted. Proceedings in the UK courts are much quicker than in the EPO. Thus there can be a problem that the UK courts may find a patent valid and infringed, only for it to be later found invalid and removed from the register by the EPO. As a result, a question that frequently arises is whether a stay should be granted in litigation pending the outcome of opposition proceedings in respect of the patent that is the subject of an EPO opposition.

Although there was a trend towards a presumption of granting a stay (having the advantage of avoiding duplication of proceedings), this trend seems to have reversed of late – see for instance Baxter Healthcare v. Bayer Corporation, 2006, and an earlier decision in Unilin Beheer BV ("Unilin") v Berry Floor NV in May 2006. The court stated that a stay may leave the parties (particularly the defendant) in an uncertain position, and unable to go about their business for many years whilst the EPO reaches its decision. Accordingly the court will only grant a stay where the waste of costs in duplicate proceedings outweighs the uncertainty for the parties.

In this case, the patentee, Unilin, brought an infringement action in the PCC for infringement of a European Patent (UK) relating to floor panelling. The court found the patent to be valid in part, allowed an amendment and ruled that it had been infringed. Meanwhile, opposition proceedings were pending in the EPO.

The defendants applied to the PCC to stay the inquiry as to damages pending the outcome of the EPO opposition proceedings. In June 2006 Judge Fysh stated that "the disposal of patent litigation…. should not in my view be made to depend upon the barometer of opposition business at the EPO". He concluded that there was no compelling reason why the inquiry should not proceed. He also held that Unilin’s entitlement to damages was not res judicata.

The defendants were seeking to appeal the decision against a stay in proceedings as well as challenging Unilin’s entitlement to damages given the uncertainty as to the future outcome of the EPO’s decision on validity. There was some debate as to the question of supremacy as between the EPO and national courts, which was the "top" tribunal for validity.

However, Jacob LJ considered it meaningless to decide the question of whether the award of damages should survive on the basis of whether the national court or the EPO is "top" since it all depends on the circumstances. Where a national court holds a patent to be valid and the EPO then revokes it, the national patent is also revoked so the EPO is "top". However, where the EPO holds a patent valid, a national court may subsequently revoke it and in such circumstances the national court is "top".

• The defendants were estopped from challenging Unilin’s entitlement to damages, whatever the ultimate results of the EPO. The principle of res judicata was not excluded by any statutory provision;

• Even if there was no estoppel, past orders as to costs could not be challenged;

• Whether or not there should be a stay of proceedings was only a matter in which the court would interfere if the previous judge were wrong in principle, of which there was no evidence and therefore the appeal for a stay of proceedings was dismissed.

Although the parties in the case settled the dispute shortly before judgment was delivered, other defendants in these circumstances are likely to feel aggrieved by the judgment. Jacob LJ observed: "Now a purist may say: it is nonsense, and moreover an unjust nonsense, for a man to have to pay for doing what, with hindsight, we know to have been lawful".

However, it was also noted that "there is a very very strong public interest in the finality of litigation" to ensure that "after a final decision businessmen should be able to get on with their business, knowing what the position is".

This decision, reversing the PCC decision and holding that an order for damages by a UK court for patent infringement will withstand a finding that the patent is invalid by the EPO, will have wide implications.

On the one hand a patentee will seek to bring infringement claims as early as possible and in jurisdictions where the procedure for doing so is quick and efficient in order to obtain a judgment before an unfavourable EPO ruling which could take several years. In the UK patent infringement actions can be dealt with promptly under a streamlined procedure in which cases may proceed to trial within six months and may reach appeal within 9 months from issue of proceedings. Such streamlined procedures may also be more cost effective than other processes. Jacob LJ had previously commented in Coflexip SA v Stolt Offshore MS Limited [2004], EWCA Civ 213 that "businessmen in this country know that they can use the rather speedy court system here to get a conclusion one way or another…one does not have to wait to find out who has won until the slowest horse in the race gets there".

On the other hand, defendants in light of this decision are more likely to seek a stay of national proceedings pending opposition procedures at the EPO. The disparity in the time it takes to hear cases in the UK compared to the EPO is further heightened by the Court of Appeal’s refusal to grant a stay. This decision follows a recent trend in which the UK Courts have frequently not been willing to stay UK proceedings in circumstances where the EPO was also considering validity of the patent. This has resulted in the UK courts and in particular the streamlined procedure being a more attractive route for patentee’s to pursue infringement proceedings.

The decision will result in even less uniformity across Europe than before, with a situation where a patent could be confirmed as valid in one country whilst held invalid in another, only to be later either upheld or revoked by the EPO where such subsequent decision may or may not affect previous national judgments as to damages for infringement. As Jacob LJ noted: "the untidy compromise inherent in the EPC…which cannot be properly resolved unless and until a rational patent litigation system for Europe is created". It is only once there is a centralised litigation system for European patents that uniformity and certainty in the status of centrally granted patents may be possible.

Unilin Beheer BV v Berry Floor NV Information Management Consultancy Limited (t/a Responsive Designs and/or Tapis UK) B&Q plc [2007] EWCA Civ 364.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 14/05/2007.