When, and why, can judges change their minds?

17 March 2015

The handing down of judgment in your favour is usually cause for celebration. In most cases such celebration is entirely appropriate. However, it might be premature, as until the final order following judgment is perfected by the court (by its being sealed) a judge is entitled to change his (or her) mind.

Following the decision of the Supreme Court in In re L, judges have a much broader discretion to change their minds of their own volition than they did under In re Barrell (where they had to show "exceptional circumstances" to justify the change). As a result of In re L, in deciding whether to change their mind judges must act in accordance with the "overriding objective... to deal with the case justly". Such discretion may have to be exercised "judicially and not capriciously", but as Lady Justice Hale stated, "every case is going to depend upon its particular circumstances".

The discretion can also be exercised at the request of a party to the dispute. They can ask the judge to deal with points not covered in the judgment, or to consider new evidence or allow pleadings to be amended and reopen the trial.

However, as Mr Justice Birss makes clear in the latest (30 January 2015) judgment in the ongoing telecommunications standards-essential patent dispute between Vringo and ZTE, while judges may have a broad discretion to change their minds, if a party is going to ask the judge to allow new evidence to be adduced after trial, or late amendments to pleadings to be made, they will have to provide cogent, compelling reasons for the judge to do so.

In the present case, Birss J. refused to allow ZTE to reopen the trial, principally because ZTE could have found the prior art much earlier, in particular if it had sought further information about Vringo's construction of the claims of the relevant patent. The expert evidence also suggested that the new prior art was "just an arguable piece of prior art".

Birss J.'s judgment also deals with Vringo's application to have the trial to consider Fair Reasonable and Non-Discriminatory ("FRAND") terms brought forward, as one patent has been held to be essential to the standard, valid and infringed. Birss J. also refused Vringo's application, and made some (obiter) comments about the parties' positions in relation to the licences they were seeking. This is dealt with further below.

Reopening the trial - the facts giving rise to the hearing

In November 2014, Mr Justice Birss held that one of Vringo's patents (the "Patent") was valid, essential to both the UMTS (3G) and LTE (4G) standards, and infringed by ZTE's UMTS and LTE products. The Patent claimed the use of "protocol transparency" during SRNS relocation. In contrast, the prior art cited by ZTE did not disclose or make obvious to the skilled addressee the use of "protocol transparency" in the relevant context. Instead the cited prior art either referred to "network transparency", or protocol transparency in a different context. In light of this the Patent's claims were held to be novel and inventive.

Just prior to the final order hearing on 19 December 2014, ZTE applied for permission to reopen the trial and amend its invalidity case to plead new prior art which, it asserted, disclosed the use of protocol transparency during handover, and thus rendered the claims of the Patent invalid as anticipated or obvious. Consequently, Birss J. refused to seal the order at the final order hearing, but ordered that there be a hearing in the new year to determine whether the trial should be reopened. That hearing took place on Friday 30 January 2015, with an ex tempore judgment given the same day.

Reopening the trial - the relevant law

In coming to his decision, Birss J. considered three issues:

  1. whether he was entitled to change his mind after judgment but before the order had been perfected;
  2. whether ZTE should be allowed to bring new evidence; and
  3. whether ZTE should be allowed to amend its pleadings at such a late stage in the proceedings.

The judge's ability to change his mind

Applications to amend an order or judgment prior to perfection are often referred to as Barrell applications, as the leading case on the courts' jurisdiction used to be In re Barrell Enterprises. In Barrell, the Court of Appeal stated that: "When oral judgments have been given, either in a court of first instance or on appeal, the successful party ought save in the most exceptional circumstances to be able to assume that the judgment is a valid and effective one. The cases to which we were referred in which judgments in civil courts have been varied after delivery (apart from the correction of slips) were all cases in which some most unusual element was present". The test distilled from Barrell was that there must therefore be some "exceptional circumstances" before the judgment should be varied.

However, the Supreme Court disapproved of Barrell in In re L and another (Children) (Preliminary Finding: Power to reverse). As a result, the test is clearly no longer one of "exceptional circumstances". As set out in Lady Hale's judgment (with which the other Supreme Court Justices agreed), "there is jurisdiction to change one's mind up until the order is drawn up and perfected". This jurisdiction must be exercised in accordance with the "overriding objective ... to deal with the case justly". However, exceptional circumstances are not required before the judge can change his mind - while the judge may have to exercise his discretion "judicially and not capriciously", "a carefully considered change of mind can be sufficient. Every case is going to depend upon its particular circumstances".

The overarching ambit of discretion has therefore changed from "exceptional circumstances" to a case-by-case approach in accordance with the overriding objective, taking into account the interests of the parties, the judicial system, other users of the court and (at least for patent cases, where there is a public interest in removing invalid patents from the register) the public at large.

The ability to plead new facts or evidence

In re L, however, was a case in which the judge decided of her own volition to change her mind about the content of her judgment. Admittedly, this was as a result of an email from a party's barrister to the judge, asking her to address a number of additional matters in an addendum to her judgment, but this did not require new evidence, nor the trial to be reopened. In contrast, in Vringo v ZTE the question was not only whether Birss J. could change his mind, but also whether he should admit new evidence at a new trial.

The leading case on the introduction of fresh evidence before the Court of Appeal is the Court of Appeal's decision in Marshall v Ladd. It sets out three conditions which must be fulfilled by an appellant if it is to be allowed to adduce new evidence before the Court of Appeal. They are:

  1. "first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial;
  2. second, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; [and]
  3. thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible."

In Charlesworth v Relay Roads Neuberger J. (as he then was) relaxed this test slightly for applications to adduce fresh evidence before a final order is perfected. He stated that while, "in many ways, an applicant seeking to persuade the judge to receive fresh evidence and/or argument on a new point is in a very similar position to an appellant seeking similar relief from the Court of Appeal", and the Marshall factors "should be in the forefront of the mind of the court when considering an application to admit new evidence after judgment has been handed down, but before the order has been drawn up, ...the court is entitled to be somewhat more flexible, and not to proceed on the strict basis that each of these three conditions always has to be fully satisfied before fresh evidence can be admitted before judgment [emphasis added]".

Although the positions on appeal and before perfection of a lower order are therefore similar, it should be easier to present new evidence or arguments before judgment - as was also pointed out by Lord Griffiths in Ketteman v Hansel Properties.

As Birss J. notes: "The point which Neuberger J. in Charlesworth v Relay Roads was seeking to express was that in a case like the one before him, with an application to raise a new point, call new evidence and have a new trial, that if the applicant does not meet the Ladd v. Marshall test, it is hard to see how, in most cases, it would be permitted. I respectfully agree with that sentiment although I think it is right to say that to characterise any element of the test by using the word "exceptional" is not now correct in the light of In re L.".

In Charlesworth v Relay Roads, Neuberger J. set out six principles to be applied where a party is seeking to call fresh evidence on a new point after judgment but before perfection. Neuberger J.'s six principles are:

  1. "The court has jurisdiction to grant an application to amend the pleadings to raise new points and/or to call fresh evidence and/or to hear fresh argument;
  2. The court must clearly exercise its discretion in relation to such an application in a way best designed to achieve justice;
  3. The general rules relating to amendment apply so that:
    1. While it is no doubt desirable in general that litigants should be permitted to take any reasonably arguable point, it should by no means be assumed that the court will accede to an application merely because the other party can, in financial terms, be compensated in costs;
    2. As with any other application for leave to amend, consideration must be given to anxieties and legitimate expectations of the other party, the efficient conduct of litigation, and the inconvenience caused to other litigants;
  4. Quite apart from, and over and above, those principles, because it is inherently contrary to the public interest and unfair on the other side that an unsuccessful party should be able to raise new points or call fresh evidence after a full and final judgment has been given against him, it would generally require an exceptional case before the court was prepared to accede to an application where the applicant could not satisfy the three requirements in Ladd v Marshall;
  5. Almost inevitably, each case will have particular features which the court will think it right to take into account when deciding how to dispose of the application before it;
  6. The court should be astute to discourage applications which involve parties seeking to put in late evidence, but cases where new evidence is found after judgment is given and before the order is drawn up will be comparatively rare."

Birss J. therefore summarised the principles to be applied on an application to admit new evidence as follows:

"The court has a jurisdiction, at least before the order is drawn up, to entertain an application of this kind as in here. The principle to be applied generally is the overriding objective to deal with cases justly and at proportionate cost. This involves dealing with cases expeditiously and fairly and allocating an appropriate share of the court's resources to a dispute. In a case like this one, in which the application is to amend the statement of case, call fresh evidence and then have a further trial, the principles relevant to amending pleadings have a role to play but the Ladd v. Marshall factors are also likely to have real significance".

Discretion to allow late amendments

Birss J. then goes on to state that: "As regards principles applicable to amendments, the modern view is probably the Court of Appeal in Swain v Hillman". This seems to be a reference to Swain-Mason v Mills & Reeve LLP. In that case, Lord Justice Lloyd stated:

"As the court said, it is always a question of striking a balance. I would not accept that the court in that case sought to lay down an inflexible rule that a very late amendment to plead a new case, not resulting from some late disclosure or new evidence, can only be justified on the basis that the existing case cannot succeed and the new case is the only arguable way of putting forward the claim. That would be too dogmatic an approach to a question which is always one of balancing the relevant factors. However, I do accept that the court is and should be less ready to allow a very late amendment than it used to be in former times, and that a heavy onus lies on a party seeking to make a very late amendment to justify it, as regards his own position, that of the other parties to the litigation, and that of other litigants in other cases before the court." (paragraph 72).

Lord Justice Lloyd also quoted Lord Justice Waller in Worldwide Corporation v GPT Ltd where he stated:

"Where a party has had many months to consider how he wants to put his case and where it is not by virtue of some new factor appearing from some disclosure only recently made, why, one asks rhetorically, should he be entitled to cause the trial to be delayed so far as his opponent is concerned and why should he be entitled to cause inconvenience to other litigants? The only answer which can be given and which, Mr Brodie has suggested, applies in the instant case is that without the amendment a serious injustice may be done because the new case is the only way the case can be argued, and it raises the true issue between the parties which justice requires should be decided.

"We accept that at the end of the day a balance has to be struck. The court is concerned with doing justice, but justice to all litigants, and thus where a last minute amendment is sought with the consequences indicated, the onus will be a heavy one on the amending party to show the strength of the new case and why justice both to him, his opponent and other litigants requires him to be able to pursue it."

Reopening - outcome

As can be seen from the above discussion of the law, while there is a broad discretion available to the judge to change his mind (In re L), there is a "heavy onus" on a party seeking a late amendment to justify the amendment (Swain-Mason v Mills & Reeve LLP), and whether the "evidence could not have been obtained with reasonable diligence for use at the trial" is an important factor in deciding whether the new evidence should be allowed (Ladd v Marshall, as applied to pre-perfection cases in Charlesworth v Relay Roads).

In the present case, Birss J. could exercise his discretion to allow ZTE's application.

However, it was clear from the history of the dispute that ZTE could have searched for, and found, the new prior art before trial. In particular, it could have sought admissions from Vringo regarding which integers of the claims were anticipated by the prior art. Birss J. believed that seeking such admissions might have alerted ZTE to the dispute about protocol and network transparency almost one year before trial. In any event, ZTE knew that this was an issue from September, when Vringo's first expert report was served, yet ZTE did not search for prior art then. It was also clear from ZTE's own statement of case on CGK that it was aware of the fact that handover was discussed in the IS-95 standard. This was a factor which was "firmly against ZTE".

Furthermore, it was unclear that the new prior art would probably have an important influence on the result of the case. Based on the four expert reports (two from ZTE, two from Vringo) which were served between 9 January 2015 and the date of the hearing, Birss J.'s conclusion was that the new reference was "just an arguable piece of prior art". This was "at best for ZTE, evenly balanced".

Birss J. considered various factors to be relevant, including that the Patent is an SEP, that the prior art was not so strong that he believed he was leaving a patent on the register which is probably invalid, that neither side had acted to their detriment, and that it was questionable whether injunctive relief could be granted.

However, the key reason why Birss J. did not allow the application was that "it is frankly incomprehensible that the handover in IS-95 was not looked at before trial", that the "application... could and should have been made before trial", and that there "is simply no good reason why the court and third parties should be inconvenienced in any way as a result of this".

FRAND - background

The November judgment was the first of three judgments scheduled to take place in the Patents Court regarding whether Vringo's patents are SEPs, valid, and infringed by ZTE. There is a trial listed for June 2015 to determine the validity, infringement and essentiality of three other patents. A fifth patent will go to trial in October 2015, following amendment to the patentee's case to plead infringement exclusively under section 60(2) of the Patents Act 1977. A sixth patent has been dropped by Vringo, after Vringo accepted that it was not infringed.

Finally, alongside these technical trials, there will also now be a trial to consider the terms of a fair, reasonable and non-discriminatory ("FRAND") licence between the parties. This trial is currently scheduled for nine days in 2016.

Following the November judgment, Vringo applied to have the FRAND trial brought forward, and the June 2015 trial stayed pending determination of the FRAND trial. ZTE opposed the application.

Vringo's position is that it has offered ZTE a global, portfolio licence to its SEPs, on FRAND terms, and that such a licence is normal industry practice. It therefore wants a trial to determine whether that offer is on FRAND terms. Its position is that if the offer is on FRAND terms, and ZTE refuses to take it, Vringo will be able to injunct ZTE for infringement of the Patent on the basis of the Patent which has already been held valid and infringed. Should its portfolio offer be determined as FRAND, the further technical trials would therefore be of little additional significance and thus the FRAND issues should be heard first.

ZTE has declared itself willing to take a FRAND licence under any patent held to be a valid SEP (including the Patent held valid and infringed), but asserts that Vringo has not offered it a FRAND licence for the Patent.

FRAND - the decision

Birss J. refused Vringo's application to bring forward the FRAND trial and stay the June 2015 trial. He reasoned that it was not clear to him that the June 2015 trial would be a waste of costs. Vringo's request would require a radical alteration to existing arrangements and the parties had probably already devoted considerable resources to preparing for the June 2015 trial.

In his discussion of the parties' submissions, Birss J. also provided some obiter comments about trials to determine FRAND terms.

First, he could not see why the court could not simply determine a FRAND rate for the patents which had been found valid and infringed - while the sum of such FRAND rates might be higher than the FRAND rate for a global portfolio licence, there would seem to be no reason why a per-patent FRAND rate could not be determined.

Second, he was not sure that ZTE's refusal to take a global portfolio licence on FRAND terms was sufficient to allow Vringo to obtain injunctive relief.

Third, he thought the position in relation to injunctive relief might be different if Vringo had made a FRAND offer in relation to the Patent alone.

Commentary

As Birss J.'s tentative comments in relation to the FRAND aspects of this case suggest, the determination of FRAND terms is something which is still in its infancy in the UK - neither this case nor the IPCom disputes with Nokia or HTC have proceeded to a determination of FRAND terms, and it is clear that the basis on which such terms should be determined is still not decided in the UK.

In relation to the application to admit new prior art and reopen the trial, it is clear that a balance is required, although the balancing act is not quite as delicate as might appear at first blush. In many ways Birss J.'s judgment adopts the more conservative approach - refusing permission allows the other aspects of the litigation to continue as originally planned, at least for the time being.

However, it is not clear that this will necessarily be the case in the long term. ZTE could appeal Birss J.'s decision to the Court of Appeal. Alternatively, it could seek to introduce the new prior art on appeal, albeit with the likely burden of having the Ladd v Marshall factors applied more stringently in that event. In either case, regardless of whether it is allowed to rely on the new prior art, it should at least avoid being censored as BT was in ASSIA v BT for failing to raise the argument before the appeal hearing.

The judgment does not, of course, prevent third parties from attacking the validity of the Patent that has been held valid in these proceedings. However, if they do so, then assuming Vringo has asked for a certificate of contested validity under section 65 of the Patents Act 1977, that third party will be at risk of paying Vringo's costs on an indemnity basis if the Patent is held to be valid in those proceedings as well.

One factor which seems to have particularly helped Vringo in defeating the application to reopen the trial was the expert evidence served between the final order hearing and the hearing to determine the admissibility of new prior art. This resulted in Birss J. concluding that he could say no more than that the prior art was "just an arguable piece of prior art".

Potential defendants should take note of Birss J.'s comments in relation to ZTE's failure to seek admissions in respect of its invalidity case. Had admissions been sought at an early stage, the prior art might have been discovered in time.


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