IPCom v HTC - the UK Patents Court remains open for business.
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December 2013
IPCom v HTC – the UK Patents Court remains
open for business.
Contents
Summary
Summary .......................... 1
On 21 November 2013 the Court of Appeal handed down its decision in
Background....................... 1
IPCom v HTC rejecting HTC’s attempt to stay UK patent proceedings during
a European Patent Office (“EPO”) opposition. The court re-formulated the Facts ................................. 2
Glaxo guidelines on when an English court should grant a stay pending the Decision ............................ 2
outcome of parallel proceedings at the EPO. It appears that stays will Comment .......................... 4
continue to be the exception rather than the rule, and an English court will in
most cases favour the continuation of national proceedings in order to provide
commercial certainty during the lengthy opposition proceedings at the EPO.
Background
European patents, once granted, are a bundle of national patent rights. Their
validity can be challenged either in the national courts of a designated
member state (in which case any decision will apply only to the designation in
that state) or centrally via the opposition procedure in the EPO. Both routes to
revocation can be pursued simultaneously. This can lead to duplication of
effort, increased costs and inconsistent decisions.
This might suggest that national courts should stay proceedings where there
are concurrent EPO proceedings. However, EPO proceedings are often slow.
National courts in some member states recognise value in refusing to stay
national proceedings where they are able to provide a judgment earlier than
the EPO in order to give the parties a degree of commercial certainty pending
final resolution.
The UK courts are not required by the Patents Act 1977 (or by the European
Patent Convention (“EPC”)) to stay their own proceedings where there are
parallel proceedings before the EPO. Instead, the court has a very broad
1
jurisdiction to stay national proceedings “where it thinks fit to do so” .
Guidance on the exercise of this discretion was provided by the Court of
2
Appeal in Glaxo v Genentech in 2008, to the effect that where there are
concurrent EPO proceedings, the court should normally refuse to stay its own
1
Section 49(3) Senior Courts Act 1981
2
[2008] EWCA Civ 23
IPCom v HTC – the UK Patents Court remains open for business 1proceedings if it is likely to resolve the question of validity significantly earlier
than the EPO.
3
Recently, in Virgin Atlantic v Zodiac (as reported here) Lord Sumption invited
the lower courts to re-examine the Glaxo guidelines to avoid putting litigants
in the same “impossible situation” as the parties in Virgin, i.e. bound to a
decision of the English court that the patent was valid, notwithstanding a
conflicting later decision by the EPO.
Facts
IPCom owns the European patent EP (UK) 1,841,268. In June 2011, it
launched proceedings in the Patents Court against HTC for infringement of
this patent, the day after Floyd J (as he then was) delivered his judgment in a
different action by IPCom in the Patents Court, finding the same patent valid
and infringed by Nokia (a decision later upheld by the Court of Appeal). In the
meantime, the EPO Opposition Division (“OD”) reached a different
conclusion, finding the patent invalid for added matter. IPCom appealed to the
EPO Technical Board of Appeal (“TBA”) and HTC applied to stay the HTC
action in the Patents Court until the TBA handed down its written decision.
The stay was granted, with the trial fixed for December 2013 (after the date
set for the TBA’s hearing).
At the TBA hearing, the TBA held that the added matter objection was
overcome by an amendment and remitted the matter to the OD. As a result,
the stay of the HTC action came to an end. HTC applied for a further stay
until a final decision of the EPO on the remitted OD proceedings, but the
Patents Court refused to stay its own proceedings on the basis of the Glaxo
guidelines. HTC appealed.
Decision
The leading judgment was given by Floyd LJ. He noted that it is inherent in
the system provided by the EPC and the Patents Act 1977 that patent
revocation may be pursued at the EPO and in the English courts at the same
time. However, proceedings in the EPO and in national courts are not truly
parallel: a finding that a patent is valid in opposition proceedings at the EPO
4
does not operate as an issue estoppel between the parties; the EPO has no
jurisdiction over infringement; and a decision by the national court to revoke a
patent with effect in its own jurisdiction is not affected by a later decision of
the EPO. As a result, considerations affecting the grant of stays in patent
cases are different from those in other cases.
Floyd LJ noted that the EPO has been a victim of its own success,
commenting that “[a] procedure which allows disputes over patent rights to
take in excess of a decade cannot meet the needs of industry, particularly in
rapidly moving areas of technology”. Even with expedition, the OD and TBA
have in this case resolved only one issue (added matter) since December
2010, with the issues of novelty and inventive step yet to be considered. By
3
[2013] UKSC 46
4
Buehler v Chronos Richardson [1998] RPC 609
IPCom v HTC – the UK Patents Court remains open for business 2contrast, a final decision on all issues of infringement and validity in the Nokia
action was reached by the English courts in just over two years. Floyd LJ
considered the delays in the EPO system to form important background to
any application for a stay.
After considering the Glaxo guidance in light of the comments by the
Supreme Court in Virgin Atlantic Airways v Zodiac, Floyd LJ recast the
guidance as follows:
“1. The discretion, which is very wide indeed, should be exercised to
achieve the balance of justice between the parties having regard to all
the relevant circumstances of the particular case.”
2. The discretion is of the Patents Court, not of the Court of Appeal.
The Court of Appeal would not be justified in interfering with a first
instance decision that accords with legal principle and has been
reached by taking into account all the relevant, and only the relevant,
circumstances.
3. Although neither the EPC nor the 1977 Act contains express
provisions relating to automatic or discretionary stay of proceedings in
national courts, they provide the context and condition the exercise of
the discretion.
4. It should thus be remembered that the possibility of concurrent
proceedings contesting the validity of a patent granted by the EPO is
inherent in the system established by the EPC. It should also be
remembered that national courts exercise exclusive jurisdiction on
infringement issues.
5. If there are no other factors, a stay of the national proceedings is
the default option. There is no purpose in pursuing two sets of
proceedings simply because the Convention allows for it.
6. It is for the party resisting the grant of the stay to show why it
should not be granted. Ultimately it is a question of where the balance
of justice lies.
7. One important factor affecting the exercise of the discretion is the
extent to which refusal of a stay will irrevocably deprive a party of any
part of the benefit which the concurrent jurisdiction of the EPO and
the national court is intended to confer. Thus, if allowing the national
court to proceed might allow the patentee to obtain monetary
compensation which is not repayable if the patent is subsequently
revoked, this would be a weighty factor in favour of the grant of a stay.
It may, however, be possible to mitigate the effect of this factor by the
offer of suitable undertakings to repay.
8. The Patents Court judge is entitled to refuse a stay of the national
proceedings where the evidence is that some commercial certainty
would be achieved at a considerably earlier date in the case of the UK
proceedings than in the EPO. It is true that it will not be possible to
attain certainty everywhere until the EPO proceedings are finally
IPCom v HTC – the UK Patents Court remains open for business 3resolved, but some certainty, sooner rather than later, and
somewhere, such as in the UK, rather than nowhere, is, in general,
preferable to continuing uncertainty everywhere.
9. It is permissible to take account of the fact that resolution of the
national proceedings, whilst not finally resolving everything, may, by
deciding some important issues, promote settlement.
10. An important factor affecting the discretion will be the length of
time that it will take for the respective proceedings in the national
court and in the EPO to reach a conclusion. This is not an
independent factor, but needs to be considered in conjunction with the
prejudice which any party will suffer from the delay, and lack of
certainty, and what the national proceedings can achieve in terms of
certainty.
11. The public interest in dispelling the uncertainty surrounding the
validity of monopoly rights conferred by the grant of a patent is also a
factor to be considered.
12. In weighing the balance it is material to take into account the risk
of wasted costs, but this factor will normally be outweighed by
commercial factors concerned with early resolution.
13. The hearing of an application for a stay is not to become a mini-
trial of the various factors affecting its grant or refusal. The parties’
assertions need to be examined critically, but at a relatively high level
of generality.”
In this case, the stay was not granted, with weight apparently given to the fact
that IPCom offered to repay damages in the event that the patent is
subsequently revoked in EPO proceedings (a consideration under the new
guideline 7).
Comment
The new guidelines provide a number of additional considerations when
deciding whether to grant stays. One important shift is the requirement for the
party resisting the stay to demonstrate why it should not be granted, whereas
previously “much weight” was to be given to the party resisting the stay as the
best judge of its own interests. However, it appears that stays are likely to
remain the exception rather than the rule. Although the guidelines state that
stays will be the default option if there are no other factors, in most cases
there will be other factors to consider. In addition to the considerations under
the previous guidance, the courts must consider: the extent to which refusal
of a stay will irrevocably deprive a party of the benefit which concurrent
jurisdiction of the EPO and the English court is intended to confer; whether
resolution of national proceedings may promote settlement; and the length of
time taken for proceedings (which must be considered alongside prejudice to
any party and lack of certainty resulting from any delay).
IPCom v HTC – the UK Patents Court remains open for business 4The judgment should allay fears based on Lord Sumption’s comments in Virgin Contacts
that stays of English proceedings would become standard. It remains to be
seen how the new guidelines will be applied by the English courts, particularly For further information
since there are a number of conflicting factors to weigh up. However, industry please contact:
concerns that stays could deny justice to patentees, alleged infringers, and
Ian Karet
those wishing to clear the way to launch new products, are clearly shared by
Partner
the Court of Appeal. As a result, the new guidance appears to favour
continuation of English proceedings in order to provide certainty, or encourage (+) 442074565800
settlement, during the lengthy opposition periods at the EPO.
ian.karet@linklaters.com
Charlie French
Associate
(+) 442074565056
charlie.french@linklaters.com
Author: Ian Karet, Charlie French
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