This is the Infringement chapter of Gordon Harris' Annual Patents Review 2017. For the other chapters of the review, please follow the links below or download the Annual Patents Review 2017 in full.
- Technical Matters and Procedure
- Competition Law, Settlement and Licensing
- Employee Inventor Compensation
- Summary and Conclusions
In previous years I have subdivided this section between "construction" and "infringement". It turns out I was right to do so, but probably not entirely for the right reasons. This year, instead of that subdivision, I am going to give over an entire section to what is probably the most significant patent decision for a decade, and certainly the most controversial. There really is no other place to start.
(a) Actavis v Lilly and following cases
Actavis sought a declaration of non-infringement from the English Patents Court regarding European patent number EP 1,313,508. Unusually, the declaratory relief sought was to cover not just the UK designation of the patent, but the French, Italian, Spanish and German designations too.
Following an early procedural spat, the Court of Appeal ruled that Eli Lilly had, in the course of correspondence, consented to service and thereby consented to the jurisdiction of the court over the claim. Lilly brought proceedings in Germany for threatened infringement of the German designation of the patent, where Actavis' jurisdictional challenge was unsuccessful. The dispute proceeded in Germany and Actavis discontinued the part of its claim in the English proceedings which concerned the German designation.
Actavis' proposed products involved pemetrexed compounds being used together with vitamin B12 for cancer treatment. However, rather than the "pemetrexed disodium" specified in the patent claims, the active ingredient in those products ("the Actavis products") was (a) pemetrexed diacid, (b) "pemetrexed ditromethamine" or (c) "pemetrexed dipotassium". Actavis admitted that like Eli Lilly's pemetrexed medicine, the proposed products would be reconstituted and diluted in saline solution (a source of sodium cations) before administration.
On 15 May 2014, Arnold J ruled that Actavis' proposed products did not infringe the patent either directly or indirectly. The Court of Appeal confirmed his conclusion in respect of direct infringement but overturned the judge's conclusion in respect of indirect infringement. Lilly appealed to the Supreme Court on the direct infringement issue; Actavis cross appealed on indirect infringement.
That is a fairly innocuous sounding backdrop for what followed. A few items had been batted around between the High Court and the Court of Appeal. Arnold J appeared to have nudged the door open for consideration of the file wrapper as an occasional aid to construction, but the Court of Appeal slammed that particular door shut.
By the time the case reached the Supreme Court, the key issue - the only one which could really change the outcome - was whether a patent could be infringed by an equivalent product or process, even if it did not strictly fall within the scope of the claims as written in the patent.
Let us just step back and put this in some context. The notion of infringement by equivalents is not new. It has been established law in the USA and in Germany for many years. One of our founding cases on the doctrine of purposive construction, Improver v Remington , was a graphic illustration of the contrasting approaches. In the UK, a slotted rubber tube was found not to infringe patent claims which specifically used the words 'helical spring'. Purposive construction could not reach that far. The German Courts reached the opposite conclusion. For them, the slotted rubber tube achieved the same ends by means sufficiently similar to amount to infringement. The key issue was the inventive concept.
Shortly after I embarked on these annual reviews, the issue of equivalents as against purposive construction raised its head. I do not propose to dwell on the history here to a great extent (I have already done that in my article "Actavis v Lilly - Should We Have Seen It Coming?"). Suffice to say there was some interesting judicial bi-play between a faction, led by Laddie J, which appeared to favour an open mind on the question, and an opposing faction, led by Aldous LJ, which rejected the whole notion.
The "Aldous faction" won the day with the definitive House of Lords judgment by Lord Hoffmann in Kirin-Amgen. In a wide-ranging judgment which set out a clear guide to patent construction, Lord Hoffmann said ():
There is often discussion about whether we have a European doctrine of equivalents and, if not, whether we should. It seems to me that both the doctrine of equivalents in the United States and the pith and marrow doctrine in the United Kingdom were born of despair. The courts felt unable to escape from interpretations which "unsparing logic" appeared to require and which prevented them from according the patentee the full extent of the monopoly which the person skilled in the art would reasonably have thought he was claiming.
He went on to elaborate further saying (-):
If literalism stands in the way of construing patent claims so as to give fair protection to the patentee, there are two things that you can do. One is to adhere to literalism in construing the claims and evolve a doctrine which supplements the claims by extending protection to equivalents. That is what the Americans have done. The other is to abandon literalism. That is what the House of Lords did in the Catnic case… The solution, said Lord Diplock, was to adopt a principle of construction which actually gave effect to what the person skilled in the art would have understood the patentee to be claiming.
In making that very definitive judgment, Lord Hoffmann brushed aside two particular issues. One was the then pending alteration to the Protocol on the Interpretation of Article 69 of the European Patent Convention, which added, as article 2, the words:
For the purpose of determining the extent of protection conferred by a European patent, due account shall be taken of any element which is equivalent to an element specified in the claims.
This had been recognised by the UK delegation to the diplomatic conference, which met in 2000 to discuss the amendment, as "a radical change to the legal position in the United Kingdom". However, in a special edition of the Official Journal in 2003, it was stated that the amendment was "purely clarificatory and editorial" because "patent practice in all the contracting states has long accepted that equivalents should be taken into account in determining the extent of protection". Lord Hoffmann went along with the view that the amendment changed nothing.
The second issue swept aside by Lord Hoffmann was the strongly reasoned judgment at first instance in the Kirin-Amgen case, by the then Mr Justice Neuberger. The heart of his judgment is expressed in the following passage, in which he cast heretical doubt on the general applicability of the use of the "Improver Questions" (by then known as the "Protocol Questions"), saying ():
It may be that the way in which these questions were expressed would seem to be a little narrow to those who practice in jurisdictions where there is a sharp demarcation between construction and infringement (for instance in Germany, where those issues are tried separately, indeed by different Courts). In a sense, by tying oneself down to construction, it might be said that one was concentrating more on form than on substance. I suspect that, free from the binding constituents of Catnic  RPC 183, the questions might not have been expressed in terms of construction. After all, the claim in Improver  FSR 183 referred to a "helical spring": as a matter of language, that could scarcely include a "rubber rod", as Hoffmann J recognised. Yet Catnic … enabled him to conclude that a rubber rod could be within the claim. It may be that, shorn of authority, the question should be characterised as whether the rubber rod infringed the claim bearing in mind the technical contribution of the patent and not merely the words of the claim
He went on to say in the next passage ():
While, particularly at first instance, it would be brave or worse to depart from the three questions, I do not find it entirely easy to accept that it can be right that, where there is no infringement on a literal construction, the Court is in every case to be forced into the straitjacket of answering the three specific questions in order to decide issues of construction or even issues of infringement
If I may allow myself a moment of smugness here, I reported that decision, back in 2001, and whilst noting that it was likely to be overturned (as indeed it was) I said:
Sooner or later the current Patents Court judges will start working their way through the ranks of the appellate courts and when they do, I do not think that we should assume that Improver is sacrosanct beyond review
Lord Neuberger's judgment in Actavis v Lilly
Turning now to the judgment of Lord Neuberger sixteen years later in Actavis v Lilly, his Lordship stripped the matter back to first principles. He acknowledged the importance of the Protocol, as amended, saying ():
… a problem of infringement is best approached by addressing two issues, each of which is to be considered through the eyes of the notional addressee of the patent in suit, i.e. the person skilled in the relevant art. Those issues are: (i) does the variant infringe any of the claims as a matter of normal interpretation; and, if not, (ii) does the variant nonetheless infringe because it varies from the invention in a way or ways which is or are immaterial? If the answer to either issue is "yes", there is an infringement; otherwise, there is not
In saying this, Lord Neuberger clarifies a point which has been the source of much confusion since Catnic itself. His view is that infringement and construction are not the same issue. Yes, you construe a patent as a first step to considering whether it is infringed, but that is not the final answer. The first step self-evidently raises questions of interpretation. The second raises questions best answered by reference to facts and expert evidence.
Lord Neuberger's approach, which is now the law, can perhaps best be summed up like this, in terms of the two questions he asks.
Lord Neuberger explained that the first question, of whether the variant infringes any of the claims as a matter of normal interpretation, requires the application of the normal principles of interpreting documents.
The second question poses more difficulties of principle: what is it that makes a variation "immaterial"? In this context, Lord Neuberger considered that the three questions formulated by Hoffmann J (as he then was) in Improver, provide helpful assistance but needed some reformulation. He proceeded to undertake the reformulation, saying that the reformulated questions remain only guidelines, not strict rules, and that they may also sometimes have to be adapted to apply more aptly to the specific facts of a particular case. The new form of the questions is as follows:
- Notwithstanding that it is not within the literal meaning of the relevant claim(s) of the patent, does the variant achieve substantially the same result in substantially the same way as the invention, i.e. the inventive concept revealed by the patent?
- Would it be obvious to the person skilled in the art, reading the patent at the priority date, but knowing that the variant achieves substantially the same result as the invention, that it does so in substantially the same way as the invention?
- Would such a reader of the patent have concluded that the patentee nonetheless intended that strict compliance with the literal meaning of the relevant claim(s) of the patent was an essential requirement of the invention?
These are the questions proffered by Lord Neuberger to assist in the second part of the test which he now establishes as the appropriate way to consider the question of patent infringement.
What is now far from clear is the position in relation to the first half of Lord Neuberger's test, this being whether the variant infringes any of the claims as a matter of normal interpretation. He did not make it clear whether, in his view, that process should continue to deploy purposive construction, as set out in the previous Catnic, Improver and Kirin-Amgen decisions, or whether a more literal basis of document interpretation should be used. He referred to the Supreme Court decision in Wood v Capita Insurance Services, as a guide to document construction, but made no reference to the historical patent construction case law.
The effect of this is that the old "Protocol Questions" are first lifted out of the context of patent construction, then re-written and slotted back into the test for infringement pursuant to the new doctrine of equivalents as a means of assisting the assessment of what it is that makes a variation "immaterial".
Whether the old version of the questions, or even the new ones, still has a role in the first step - the assessment of infringement on the basis of "normal interpretation" is not clear. We will return to that point later.
Applying this new approach to the case in hand, Lord Neuberger said ():
In the present case, there is no doubt that, according to normal principles of interpreting documents, the Actavis products do not infringe the patent, as in no sensible way can pemetrexed-free acid, pemetrexed ditromethamine, or pemetrexed dipotassium mean, i.e. be said to fall within the expression, "pemetrexed disodium" in claim one of the Patent, any more than a slotted rubber rod can be said to be within the expression "a helical metal spring" in the claim in the Improver patent. According to normal principles of interpreting documents, then, this would be the end of the matter
However, under the new approach, that was not "the end of the matter". Lord Neuberger considered the question of "immaterial variants" in the light of his reformulated three questions and concluded ():
In my view, application in the present case of the three questions just identified results in the conclusion that the Actavis products infringe. So far as the first question is concerned, there can be no doubt but that those products work in the same way as the invention: they all ultimately involve a medicament containing the pemetrexed anion and vitamin B12. Thus, they achieve substantially the same result in substantially the same way as the invention. Indeed, as in the Court of Appeal, Actavis realistically accept that the first question is to be answered yes
In relation to the second question, he concluded that the notional addressee of the patent would appreciate that each of the Actavis products would work in precisely the same way as pemetrexed disodium when included in a medicament with vitamin B12. When it comes to different versions of pemetrexed medicaments, it is clear that the use of a free acid, and of ditromethamine and of dipotassium salts, was in each case well established as at the priority date.
Turning to the third question, he said ():
…the Court of Appeal considered that the notional addressee "would understand that the patent was clearly limited to the disodium salt, and did not extend to the diacid, or the dipotassium or ditromethamine salts". They based this conclusion on the fact that the specification of the Patent contains a number of passages which refer to "anti-folates" and the like and other passages … which refer to pemextred disodium, which is "a highly specific chemical compound", and the fact that the claim is limited to pemetrexed disodium would therefore lead the notional addressee to conclude that the claim is indeed intended to be so limited.
Taking all that in mind, he reached the following conclusion ():
In my opinion, the Court of Appeal adopted an approach which places too much weight on the words of the claim and not enough weight on article 2 of the Protocol (and is it only right to add that, in doing so, they were, like Arnold J at first instance, following Lord Hoffmann's guidance in Kirin-Amgen). Thus, when considering the third test, Floyd LJ made a point at paragraph 72(ii) of his judgment that "there is no obvious leeway as a matter of language for giving it a broad as opposed to a narrow construction". That seems to me to demonstrate the risk of treating the issue raised by the third question as being one of normal interpretation. (Another way of looking at the point is, in the language of Sir Hugh Laddie, that it involves wrongly conflating the issue of interpretation with the issue of scope of protection). As already explained, if it was a decisive point it would make a nonsense of asking the three questions: if one cannot depart from the language of the claim when considering those questions, what is the point of the questions in the first place?
Lord Neuberger's last word on the key issues was as follows ():
Looking at matters more broadly, the addressee of the Patent would, as I see it, understand that the reason why the claims were limited to the disodium salt was because that was the only pemetrexed salt on which the experiments described in the specification had been carried out. However, it does not follow that the patentee did not intend any other pemetrexed salts to infringe: the suggestion confuses the disclosure of the specification of a patent with the scope of protection afforded by its claims. Particularly given the facts set out in paragraph 25 above, it seems to me very unlikely that the notional addressee would have concluded that the patentee could have intended to exclude any pemetrexed salts other than pemetrexed disodium, or indeed pemetrexed free acid, from the scope of protection.
Accordingly, he concluded that, subject to considering the prosecution history, the Actavis products infringed claim 1 of the Patent.
The issue of the prosecution history raised its head at first instance. The question was whether the use or consideration of the prosecution history, to assist in the process of construction, was allowable.
It is worth considering the history of the issue in this case in a little detail.
The original purpose-limited claims were in general form, referring to the use of a methylmalonic acid in association with an anti-folate.
The European Patent Office's examiner raised objections regarding disclosure and clarity based on the fact that the use of general language disclosed too many possible combinations of compounds. He said that the application provided support for only a limited number of such compounds. The response from Lilly was a new set of claims limited to:
Use of pemetrexed in the manufacture of a medicament for use in combination therapy for inhibiting tumour growth in mammals wherein said medicament is to be administered in combination with vitamin B12 or a pharmaceutical derivative thereof
Lilly's patent attorney said that this was done in order to expedite the application proceeding to grant and was without prejudice to wider protection being sought in future divisional applications.
The examiner maintained his objection saying that "pemetrexed" was only disclosed in the patent once, and then in conjunction with Lilly's reference number for pemetrexed disodium. Lilly responded with another set of claims, this time limited to pemetrexed disodium as the anti-folate drug. The claims were accepted in this form.
Actavis contended that classical file wrapper estoppel should apply and that the patent should be interpreted as being limited to pemetrexed disodium in the sense that any use of another pemetrexed compound could not infringe.
This raised two questions. Is it permissible to have recourse to the prosecution history at all, and if so, what would the effect be in this case?
Reviewing the law in other European jurisdictions, Lord Neuberger concluded, as regards the first question ([-):
In my judgment it is appropriate for the UK courts to adopt a sceptical, but not absolutist, attitude to a suggestion that the contents of the prosecution file of a patent should be referred to when considering a question of interpretation or infringement, along substantially the same lines as the German and Dutch Courts. It is tempting to exclude the file on the basis that anyone concerned about, or affected by, a patent should be entitled to rely on its contents without searching other records such as the prosecution file, as a matter of both principle and practicality. However, given that the contents of the file are publicly available and (at least according to what we were told) are unlikely to be extensive, there will be occasions when justice may fairly be said to require reference to be made to the contents of the file. However, not least in the light of the wording of article 69 EPC 2000,… the circumstances in which a court can rely on the prosecution history to determine the extent of protection or scope of a patent must be limited.
While it would be arrogant to exclude the existence of any other circumstances, my current view is that reference to the file would only be appropriate where (i) the point at issue is truly unclear if one confines oneself to the specification and claims of the patent, and the contents of the file unambiguously resolve the point, or (ii) it would be contrary to the public interest for the contents of the file to be ignored. The first type of circumstance is, I hope, self-explanatory; the second would be exemplified by a case where the patentee had made it clear to the EPO that he was not seeking to contend that his patent, if granted, would extend its scope to the sort of variant which he now claims infringes.
Where this gets really interesting is in the answer to the second question. Far from deploying what we all understand by file wrapper estoppel, which might have led to the limitation of the scope of protection to pemetrexed disodium, Lord Neuberger suggested that the examiner had actually got it wrong, and the limitation adopted by Lilly was unnecessary.
He said that it did not matter as, in any event, the whole point of the doctrine of equivalents is that ():
…it entitles a patentee to contend that the scope of protection afforded by the patent extends beyond the ambit of its claims as construed according to normal principles of interpretation.
The "correction" of the examiner was clearly only obiter, but nonetheless it raises some interesting points.
Accordingly, Lord Neuberger concluded that the Actavis products would directly infringe the UK designation of EP '508.
The Supreme Court also confirmed the Court of Appeal's decision that the Actavis products would indirectly infringe the UK designation.
Where does all this leave us? Now we have a doctrine of equivalents - that much is clear. I believe that I am in a minority in thinking that is exactly right. The infringement of a patent should, in the end, relate not solely to the words on the page - we all know what fickle servants words can be - but rather to the inventive concept.
In my view, it is also right that, in some circumstances, reference should be made to the file or "prosecution history". That also recognises the inevitable ambiguity of words, and the need constantly to place them in their context.
It does, of course, leave a multitude of questions unanswered, and the courts have already set about the task of finding the full meaning of Lord Neuberger's judgment - his last substantial IP judgment as it turns out.
There have been five substantive judgments written in the light of Actavis - three at first instance and two in the Court of Appeal.
(i) Generics v Yeda
In Generics v Yeda, Arnold J took a look at the implications of Actavis v Lilly.
On the interpretation of a claim for validity purposes, Arnold J appears to suggest that Kirin-Amgen purposive construction continues to apply. However, the reasoning is somewhat muddled. Neither party nor the judge appears to have considered whether "normal interpretation" according to English principles of English contractual law is "purposive" or whether "literal meaning" means "contextual literal meaning" rather than "acontextual meaning". Some of the claimant's submissions described and accepted by the judge would appear to conflict with Lord Neuberger's concerns about conflation. It may be that "normal interpretation" is a type of "purposive construction" (i.e. that which aligns with principles of English contractual law) but whether such a purposive construction is Catnic purposive construction and so can include consideration of the original Improver questions is another matter.
Arnold J goes on to confront one of the key issues saying ():
Another question which arises in the light of the Supreme Court's decision is what effect, if any, this has on the law of novelty. This issue is not addressed in the judgment of Lord Neuberger, and he makes no reference to Synthon v SKB. It will require another decision of the Supreme Court to supply a definitive answer to the question. Given the conclusion I have come to with respect to obviousness, however, I do not propose to consider the matter at length.
It has been taken as read by patent practitioners for many years, that the law was that a claim lacked novelty if the prior publication disclosed subject matter which, if performed, would necessarily infringe the claim. In the Generics v Yeda case, counsel for the Defendant submitted that that was no longer the law. Rather, the claim would only lack novelty if the prior publication disclosed subject matter which fell within the claim on its proper interpretation. It was not sufficient that the subject matter would infringe the claim applying the doctrine of equivalents.
Arnold J had already found the patent in suit to be invalid for obviousness, but felt that he had to address the question of novelty in case the case went further on appeal. He said that he broadly agreed with counsel for the defendants, that it would not be sufficient that the subject matter would infringe the claim applying the doctrine of equivalents. However, in order to ensure completeness in his judgment, he went ahead and looked at the question of novelty over a particular item of prior art and concluded that, if it is legally possible for a claim to be deprived of novelty by virtue of the doctrine of equivalents, then claim 1 did indeed lack novelty over the prior art in question. The point clearly remains "at large".
(ii) Actavis v ICOS
The Court of Appeal had the opportunity to consider Lord Neuberger's judgment in Actavis v ICOS (1 November 2017). This was an appeal from the judgment of Birss J at first instance in the case involving the drug tadalafil, marketed by Eli Lilly as CIALIS for the treatment of erectile dysfunction - a case which has disappointingly turned out to be far less amusing than one might have hoped.
Claim 1 of the patent in suit sought to protect a dosage regimen in the following terms:
A pharmaceutical unit dosage composition comprising 1 to 5mg of a compound having [a particular structural formula] said unit dosage form suitable for oral administration up to a maximum total dose of 5 mg per day.
That was the wording that fell to be construed, and, reviewing the judge's findings in the Court of Appeal, Kitchin LJ said ():
There was no issue between the parties as to the correct approach to the construction of the claims in issue. The question is what the person skilled in the art would have understood the patentee to be using the language of the claims to mean. Nothing in the recent decision of the Supreme Court in Actavis v Eli Lilly affects the application of this approach in the context of this case.
This was not a dismissal of the Supreme Court's judgment, which is after all fully binding on the Court of Appeal, but rather a recognition that in the context of validity, the correct approach to construction was not addressed by the Supreme Court.
(iii) Fisher & Paykel v ResMed
Richard Meade QC, sitting as a deputy judge, took the opportunity to consider the implications of the Actavis decision in Fisher & Paykel v ResMed. The patent in suit in this case was a mask system designed to assist sleeping in the case of people suffering from sleep apnoea.
Considering the question of claim construction, the judge said ():
Since the decision of the Supreme Court in Actavis v Eli Lilly, it may be preferable to refer to "claim scope" rather than to "claim construction", to indicate that (at least for the purposes of deciding whether a claim extends to equivalents in relation to infringement) it is no longer permissible to use the one-stage purposive construction familiar from Kirin-Amgen. That is not to say that the exercise does not involve interpreting words, of course.
He went on to say (-):
The overall exercise for the Court is, therefore, first to determine what the "literal" (also referred to by the Supreme Court as the "normal") meaning is, and only move on to the three questions if the variant is not within it… In the end, and especially in the light of the decision of Arnold J in Generics v Yeda, I do not think it would have made any difference if I had applied Kirin-Amgen, but I remain of the view that it was appropriate to consider and apply Actavis, which is now the law. I also think it is not a legitimate approach simply to consider what would happen under Kirin-Amgen and then ask if and how Actavis changes the position.
In this respect he is clearly right. Nothing in Lord Neuberger's judgment indicates that the proper approach would be to go through the full Catnic ImproverKirin-Amgen approach, and only to move on to equivalents if infringement cannot be found on that basis. He sets out an entirely new regime, and Richard Meade QC is quick to acknowledge that.
Richard Meade QC drew support for that position from the judgment of Arnold J in Generics v Yeda where he appeared to say that, prior to considering equivalents, the court must apply purposive and not literal construction, and that as a matter of law, there cannot be anticipation by equivalents.
The deputy judge noted that both these points are arguable and likely to be considered by the Court of Appeal, and indeed possibly the Supreme Court in due course. He went on to apply his own gloss saying ():
I consider that at all stages in the Actavis approach (including determination of the normal meaning) the Court should have regard to what the invention is. Actavis makes clear that this determination is not limited to what is in the claims and may involve consideration of broader teaching in the specification where the patentee asserts what has been accomplished. This may not be an easy exercise (and it was often difficult under Improver), but in the present case I have to determine the invention largely from the claims for purely practical reasons, because the specification includes little or nothing of significance beyond a large number of consistory clauses and the preferred embodiments. In identifying the invention I think I should pay attention to the two part form of the claim, and assume that the invention relates importantly but not exclusively to the characterising part of the claim.
What we may be seeing here is something which will happen a lot in years to come. This is judges reaching out to identify the inventive concept - to try to encapsulate the nature of the invention in straightforward terms. This may be one of the major results of the Actavis decision.
So far, the judges seem to suggest that Lord Neuberger's reference to "literal meaning" is to a strict, literal or acontextual meaning.
They also seem to suggest that "normal interpretation" is broadly the same as "purposive construction" as per Kirin-Amgen and the previous cases.
No judge has yet raised the possibility that "normal interpretation" and "literal meaning" are the same thing, both being a contextual, literal meaning. Nor have they acknowledged that Kirin-Amgen purposive construction permits consideration of the Improver questions when interpreting the scope of the claim and that this is in fact expressly ruled out by Lord Neuberger in Actavis v Lilly.
This could all be resolved by concluding that (i) a claim should be construed for validity purposes by adopting a contextual literal approach which is, essentially, purposive construction but without the questions, and (ii) that this is the same as "normal interpretation" i.e. the first stage of the infringement test.
Such an approach can be reconciled with Lord Neuberger's reasoning in Actavis v Eli Lilly as the comments of Arnold J, Kitchin LJ, and deputy judge Richard Meade QC make clear.
(iv) Illumina v Premaitha
Following in the spirit of Arnold J, Henry Carr J delivered a massive judgment in the case of Illumina v Premaitha. The case involved five Illumina patents regarding prenatal tests, and is one of those cases which addresses almost every issue in patent law. It will be a recurring theme throughout this paper.
In relation to the Actavis v Lilly decision, Henry Carr J, set out the context in which Lord Neuberger had evolved his judgement, and dealing first with the question of "normal interpretation" he said ():
The use of the word 'literal' may be confusing. In Generics v Yeda, Arnold J rejected a submission that a patent claim should be interpreted in the same way as a commercial contract. He referred to (amongst others) the following paragraphs in the judgment of Lord Neuberger where he said that "a patent is to be interpreted on the basis that it is addressed to a person or group of persons who is or are likely to have a practical interest in the claimed invention"; where he said that both the issues of (i) "normal interpretation" and (ii) infringement by immaterial variants should be "considered through the eyes of a notional addressee" of the patent; and, where he referred to issue (ii) involving "not merely identifying what the words of a claim would mean in their context to the notional addressee". Arnold J held that normal interpretation involves interpreting the words in context and the context must include "the very purpose for which the document exists, namely to describe and claim an invention".
Henry Carr J went on to say ():
I agree with Arnold J. The Protocol on the interpretation of Article 69 precludes a strict, literal interpretation, where the description and drawings are used only to resolve an ambiguity in the claims. This applies generally to interpretation of claims and is not confined to consideration of equivalents. Normal interpretation means purposive interpretation." [emphasis added]
Dealing specifically with the doctrine of equivalents, Henry Carr J said ():
Consideration of the first question, and in particular 'how the invention works' requires the court to focus on the inventive concept of the patent;… The second question applies to variants which rely on or are based upon developments which have occurred since the priority date. Whether the variant represents an inventive step over the patent is not determinative of non-infringement, but is a relevant factor and may render it less likely that the patentee will succeed. The fact that the claim cannot on any sensible interpretation cover the variant is not enough to justify holding that the patentee does not satisfy the third question. In answering the third question, it is material to ask whether the component at issue (or more generally the claim feature at issue) is an essential part of the invention.
(v) Saab Seaeye v Atlas Elektronic
The fifth and final decision since Actavis was a decision of the Court of Appeal in Saab Seaeye v Atlas Elektronik. The issue in this case was the construction of the claim language to an "impact initiated attachment device" comprising a "trigger mechanism for triggering activation of the drive mechanism comprising a trigger extending from the front face of the housing". After considering the dictionary definitions of "trigger" and "mechanism", the judge had concluded that the claim was limited to a mechanical trigger mechanism.
Floyd LJ considered the well-known eleven point test which evolved from Kirin-Amgen, and reached its final form in the case of Virgin Atlantic v Premium Aircraft. One of those eleven points (point (ix)) says "it further follows that there is no general doctrine of equivalents".
Following Actavis v Lilly, Floyd LJ commented on this point as follows ():
Sub-paragraph (ix) must now be read in the light of the Supreme Court's judgment in Actavis v Lilly, which explains that, at least when considering the scope of protection, there is now a second question, to be asked after the patent claim has been interpreted, which is designed to take account of equivalents. There was some reference in the written arguments to the impact of that decision on the present case. In the end, however, [counsel for Saab] disclaimed any reliance on any doctrine of equivalents for the purposes of supporting an expansive scope of claim in the context of invalidity. That issue will therefore have to await a case in which we are called upon to decide it.
I take a couple of points from that passage in Floyd LJ's judgment. The first is that the question of a "validity gap" will have to wait for another day. The judges have dabbled with the idea, but nothing definitive has yet been stated. There will undoubtedly be opportunities in the months ahead.
The second point is the interesting approach adopted by the Court of Appeal. Floyd LJ starts from the eleven points arising from the Virgin case. He then talks about how point (ix) has to be reconsidered in the light of Actavis v Lilly. I believe that this is going to prove to be the wrong approach. It is something like the approach which deputy judge Richard Meade QC identified in his judgment in the Fisher & Paykel case as being wrong, this being to adopt all the previous practices, and then bolt on reference to equivalents at the end. That is precisely not what Lord Neuberger intends. The very fact that he has uplifted the protocol questions from their original context and put them down, rewritten, in the context of analysis of immaterial variants, indicates that the rules of the game have changed. It is no longer appropriate to go through exactly the same procedure. It may be that there will be some reluctance to embrace wholesale change, and that the Court of Appeal in particular will cling, for as long as possible, to as much of the old regime as it can. However, they are going to have to learn to live with the fact that the world has changed.
I should say here that there were quite a few decisions on the question of patent construction in 2017 before the Actavis v Lilly judgment was handed down. I have chosen to ignore them entirely. They all start from Kirin-Amgen and as such they are all wrong at law. The Supreme Court decision overrules each and every one of them.
In the next few weeks, the Warner-Lambert case will be heard by the Supreme Court. The issues in that case concern validity, and include in that context the correct approach to the construction of patent claims. This presents the Supreme Court with an opportunity to address the areas of uncertainty flagged in the Autumn 2017 judgments discussed above. Hopefully, by Easter 2018, the question of the proper interpretation of patent claims for the purposes of assessing validity, and of whether there is now a validity gap in patent law in the UK, will be rather more settled.
In this section last year the highlight was the ongoing case of FKB v Abbvie. I ran through the long saga of the interlocutory stages in the procedure, concluding that the Court of Appeal considered that there was a realistic prospect that a trial judge would grant the declarations sought in relation to all applications. On that basis, all the strike out applications failed and, pretty much at the same time as I was delivering my presentation, the case was being heard as a full trial before Henry Carr J.
To recap, FKB initially sought the revocation of two AbbVie patents relating to the antibody sold under the brand name Humira. FKB also sought a declaration that it was obvious at the relevant priority date to treat the various indications by a 40 mg dosage regime. This would create a squeeze between infringement and validity, such that an action for infringement could not succeed in the United Kingdom, whether it was based on an existing patent or a later granted divisional.
AbbVie applied to strike out the claim for declaratory relief on the basis that the court did not have jurisdiction to make the order sought.
FKB sought to narrow its declaration somewhat and to plead facts which had occurred subsequent to the commencement of proceedings: six days after the claim form was issued, Abbvie wrote to the EPO stating that it no longer approved the text of one of the granted patents which was in a late stage of opposition proceedings. FKB contended that the purpose of AbbVie abandoning the patent was to avoid adjudication on its patentability by the UK court and the opposition division while seeking to ensure that the subject matter of the alleged invention was maintained by a still pending divisional application, such that it would be many years before the EPO would be in a position to adjudicate finally on the patentability of the subject matter of any granted patent resulting. FKB relied upon these allegations to demonstrate why the granting of the declaration which it now sought would serve a useful purpose, by achieving commercial certainty in respect of its own product by the date of its intended launch in the summer of 2018. In the Court of Appeal's interim judgment Lord Justice Floyd identified what he described as "AbbVie's real complaint" in the following terms ():
…by asserting that the dosing regime is old or obvious, [the declarations] are making it clear that a future patent claim to the regimen would be invalid. Accordingly, if AbbVie were to obtain the grant of claims in that form, the resulting patent would have been pre-emptively adjudged invalid. There is therefore, implicit in the Arrow declaration, an inter partes declaration of invalidity of a putative patent, not yet granted, having those claims.
Some of the final words from the Court of Appeal at the interim stage were ():
In our judgement there is nothing in the scheme of the EPC and the Act to prevent such declarations in cases where there is a real justification for their grant. It is necessary to examine quite carefully the ways in which it is suggested that the grant of such a declaration would conflict with that scheme.
So the case duly proceeded to full trial, and to a first instance judgment published on 3 March 2017. Henry Carr J heard voluminous evidence on the patenting procedure, the various divisionals granted, abandonment of claims and indeed patents along the way, and the need, or otherwise, for a declaration in the form sought. On the legal principles, the judge noted that the approach to the grant of declarations is pragmatic, and a matter of discretion rather than jurisdiction. A negative declaration should be rejected where it would serve no useful purpose. Negative declarations are unusual and caution should be exercised when extending the circumstances in which they are granted. On the other hand, where a negative declaration would help to ensure that the aims of justice were achieved, "the Courts should not be reluctant to grant such declarations. They can and do assist in achieving justice" (Messier-Dowty Ltd v Sabena).
Henry Carr J said that when considering whether to grant a declaration, the Court should take into account ():
…justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration.
On considering all the evidence, the judge concluded ():
…the grant of the declarations will achieve one or more useful purposes. There has been a contested trial in which AbbVie has sought to resist the relief claimed and in which the Claimants have succeeded. In those circumstances, it is just to the Claimants to grant such declarations.
For the same reasons, there is no injustice to AbbVie in granting the declarations. Having concluded that the dosage regimens of the Claimants' products were anticipated or obvious at the priority dates, and that the declarations will serve a useful purpose, I do not consider that the grant of this relief can be resisted.
The judge took the view that on the "most unusual" facts of this case, there were special reasons supporting the grant of the declarations. These included: AbbVie's conduct in threatening infringement whilst abandoning proceedings at the last moment (in order to shield its patent portfolio from scrutiny); the amount of money at stake for the Claimants in terms of investment in clinical trials and potential damages if they launch at risk; and the need for commercial certainty, having regard to Abbvie's threats to sue for infringement throughout the world.
Having considered the prior art and instances of prior use cited by the claimants, the judge concluded that the administration of the Claimants' proposed products by a dosage regimen of 40 mg once every two weeks by subcutaneous injection was obvious as of 8 June 2001, the claimed priority date of a key patent family. The judge concluded that it was in the interest of justice to grant the declarations sought in the unusual circumstances of the case.
It is important to emphasise the special evidence in this case. This is not an opening of floodgates, though it does represent a very significant option for companies caught in a cascade of endless divisionals.
For example, in the case of Generics v Yeda, the Patents Court took a look at the position. The FKB v Abbvie case had settled after the substantive first instance judgment but had reached the Court of Appeal in the interim dispute. In the Court of Appeal, Floyd LJ had summed up the new legal position as follows ():
…we do not consider that there is any issue or principle which prevents the granting of Arrow declarations in appropriate cases. Drawing the threads together:
(i) A declaration that a product, process or use was old or obvious at a particular date does not necessarily offend against Section 74 of the Act.
(ii) Such a declaration may offend against the Act where it is a disguised attack on the validity of a granted patent.
(iii) Such declarations do not offend against the scheme of the EPC or the Act simply because the declaration is sought against the background of pending divisional applications by the counter-party.
(iv) On the other hand the existence of pending applications cannot itself be a sufficient justification for granting a declaration.
(v) Whether such a declaration is justified depends on whether a sufficient case can be made for the exercise of the court's discretion in accordance with established principles.
Basically, in the Generics v Yeda case, Arnold J could find no evidence to support the granting of a declaration. Yeda had filed divisionals, but this alone was not enough. Validity had been vigorously defended in the UK. There was nothing wrong with the patentee's public statements that it intended to enforce its patent portfolio. Since the patent had been found invalid, the judge did not see additional benefit, in terms of persuasive value or commercial certainty, in awarding the declaration sought. Accordingly the declaration was refused.
General Civil Restraint Order
It is, to say the least, somewhat unusual for a General Civil Restraint Order to be granted in an intellectual property case. However, in Perry v Brundle, such an order was made against a defendant, Richard Perry, who had been a thorn in the side of IPEC for a considerable amount of time.
In 2015, the judge awarded an Extended Civil Restraint Order against the same individual. That order had expired.
Following further behaviour of an objectionable nature by Mr Perry, the judge considered the options for extending the order to a General Civil Restraint Order. Considering various authorities he concluded ():
It seems to me that the principles … in relation to an application for an ECRO apply equally in the context of a GCRO save that I must be further satisfied that an ECRO would not be sufficient or appropriate. Generally this will require evidence that the party concerned is likely to persist in the future in issuing claims or making applications which are totally without merit concerning matters other than those involving or relating to or touching upon or leading to the proceedings in which the order is made.
The judge explained that Mr Perry made "no bones" about his intention to make several claims and applications in the future. The judge referred to a letter dated 24 August 2016 which referred to an extensive list of "relief sought". The letter was said to be one of many lengthy letters sent by Mr Perry to members of the judiciary or Collyer Bristow (Brundle's lawyers) both before and after the grant of the ECRO. The judge also referred to Mr Perry's submissions in the hearing before him.
He concluded that he was satisfied that there was a real risk that Mr Perry intended to bring claims and applications in the future that were totally without merit and which necessitated the grant of a General Civil Restraint Order, for two years, starting from 27 March 2017.
Account of profits
It is similarly quite unusual to encounter cases regarding the process of assessing an "account of profits" following the outcome of a patent dispute. This is what happened in the last year in the case of OOO Abbott v Design & Display.
It has generally been my advice to successful parties to avoid the account of profits process, on the basis that profits can be magically made to disappear by accountants at the stroke of a pen. However, there are times when it is compelling to go in that direction rather than seek conventional damages.
In this case, HHJ Hacon had one go at making an order in respect of account of profits, which was subsequently referred to the Court of Appeal. In February 2016 the Court of Appeal overturned his judgment, in respect of both causation and deduction of overheads. They concluded that the judge's findings of fact had not made it possible for the Court of Appeal to assess the profits to which the patentee was entitled, and so the case was remitted back to IPEC.
In April 2017, HHJ Hacon had another go. The judge repeated large chunks of the Court of Appeal's judgment and extracted key points to be deployed in the assessment process. These were, essentially:
- In an account of profits the clamant is entitled to the infringer's profit made from the exploitation of the right infringed;
- Where the right is a patent, the invention must be identified. Generally speaking an invention disclosed in a patent will be that which is set out in a claim. But generally, as one progresses down the list of claims in a patent the matter set out in each claim becomes successively more extensive and the scope of the monopoly correspondingly more confined;
- Where the invention is a product, the claimant is entitled to the infringer's product made from the sales of articles or part articles which precisely embody the invention;
- Where the patent protects only part of an article sold by the infringer, the claimant is entitled to the profit made by the infringer from the sale of the entire article if either (a) the invention relates to an essential feature of those goods, or (b) the goods would not have existed had the defendant not infringed the claimant's patent; The two criteria are alternatives. If either is satisfied apportionment is not appropriate. However, HHJ Hacon said that neither test is binary. It could be that from the point of view of some purchasers the relevant feature is essential but from the point of view of others it is not. Similarly it is possible that if the protected feature had not been available for use, some of the entire goods would have come into existence, but fewer of them. In such cases the court should make a partial apportionment: the infringer must account for the profit on a proportion of the entire articles;
- Profits must also be accounted for on non-infringing but "convoyed" goods or services. If the sales of the products embodying the infringed patent "drove" sales of other goods, the latter qualified as sales of convoyed goods and the profits incurred should be added to the damages;
- The evidential burden in relation to the profits to which a successful claimant is entitled lie on the infringer. That includes the issues of whether the defendant must pay to the claimant his profits on entire articles or an apportioned part of the profits and whether there were sales of convoyed goods for which the defendant must account. The relevant evidence is more likely to be in control of the infringer than the claimant.
The judge went on to apply his own criteria, before giving very particular consideration to the question of the deduction of general overheads. In this case, after the trial on liability, disclosure was ordered which indicated that the infringer, Design & Display, had made a net profit of nearly £106,000. On that basis Abbott elected for an account of profits. However, following the evidence in the account, the profit had been transformed into a loss. The infringer now contended that no payment at all was due. The judge said ():
While it is to be expected that detailed evidence will provide a different figure in an account from that given in disclosure, a transformation such as this one could be the result of negligent or even deliberately misleading disclosure by the infringer. In an appropriate case it would be open to the … claimant to apply to re-elect for an enquiry as to damages and claim the costs thrown away. That was not done here, so I need to consider the discrepancy no further.
I will not go through the individual overhead costs as considered by the judge in this case. Suffice to say, the difficulty of assessing the true position bears out my overall view that it is only in exceptional circumstances that an account of profits should be considered.
Damages - disclosure in an inquiry
In a more conventional case, Napp v Dr Reddy's, the question of case management in an enquiry as to damages was considered by the Court. This was a case involving damages arising under a cross undertaking following the grant of a subsequently overturned injunction. Sandoz sought damages in the order of £100 million, a sum more than the annual value of the market, notwithstanding that the term of the injunction was approximately 6 months. It argued that in the counter-factual scenario, its additional long term profits would have been much higher than was possible in the actual scenario created by the injunction.
Napp sought specific information before it could properly answer the claim at that level. Birss J agreed with Napp and indicated that Sandoz should provide further information in respect of:
- The various claiming parties in the Sandoz group;
- Details of numerical calculations relied upon in respect of projected growth rates, terminal value calculations and total profits figures;
- Percentage profit margins on each pack of relevant product. A blended profit margin, blended across all packs and for all companies, was not adequate. Napp was entitled to understand what profit margin Sandoz' companies were using in order to support their claim. Confidentiality was not a reason not to provide the information as suitable confidentiality agreements could be made and the parties had already agreed that such should take place.
The case of Permavent v Makingave rise to an interesting issue. An entitlement dispute arose in the context of a more general breakdown in relations between the parties. The defendant was the registered proprietor of the patents in issue but conflicting evidence in the case supported the position of both the claimant and the defendant to claim title.
The deputy judge was asked to award an interim injunction restraining the defendant from transferring or licensing various patents and patent applications pending the resolution of the entitlement dispute, conditional upon royalty payments by the claimant to the defendant if appropriate.
The deputy judge applied the traditional American Cyanamid principles, concluding on the balance of probabilities that the relief sought should be awarded. However this was made conditional not just on the usual cross undertaking in damages being given but also on the making by the claimant of quarterly payments to the defendant pursuant to a licence agreement previously reached. Although the defendant argued that the royalty rate was too low (and the claimant's position was that it was put in place specifically for patent box purposes) the deputy judge considered a running payment of approximately half the mid-line royalty figure for such patents to be the appropriate condition.
In the context of the case, additional liberty to apply on both sides was awarded for a relaxation of the conditions or a relaxation of the injunction, or possibly for increased stringency of the injunction.
In Unwired Planet v Huawei (non-technical), there were a considerable number of expert witnesses involved. I have always had a visceral revulsion to the notion of "hot-tubbing" - the mental image conjured up is too grotesque in most instances. However, I think the first time such a practice was put into effect in a patent trial was in this case. Describing the rationale Birss J said ():
During the trial I decided that it would be useful if the evidence of [two of the experts] started with a short period of concurrent evidence… This was in order to address certain general questions which I would otherwise have asked to the experts during their oral evidence. They were not points addressed to either witness in particular and it seemed to me that the fairest way of dealing with it was to ask them both, hence a concurrent evidence session. …It helped me clarify my understanding of some of the economic issues and I am grateful to both experts.
In the same way that we have seen a trend for judges to ask for factual or technical briefing before a trial, so this practice of putting the experts together during the trial may gain wider use as time proceeds.
A specific issue regarding expert evidence arose in the case of Generics v Yeda. Arnold J considered a particular point regarding overlapping experts.
At the case management conference, the claimants considered that it was likely to be possible to adduce evidence from one expert, whereas the defendants considered that it might be necessary to have three experts. Arnold J gave the parties permission to call up to three experts each but said that he "gave the Defendants the following warning" ():
I think it is going to be a recipe for trouble if you have different human beings covering both the clinical aspect and the neurological aspect. If you have read my judgments over the past couple of years where you have multiple expert cases, you will see that time and time again I have commented on the difficulties that are caused by having experts that overlap with each other. It really is not helpful.
The claimants duly relied upon evidence from one expert; the defendants from two. There was a fair bit of duplication across the evidence given by the defendants' experts "made manifest, rather than avoided, by the fact each expert repeatedly stated that he agreed with passages in the other expert's reports". This was strongly criticised (-):
Inevitably this led to counsel for the Claimants having to raise on the first day of the trial the question of which expert he was required to cross-examine where their evidence overlapped. Despite the fact, that, on the face of their reports, Prof Brück was the Defendants' primary expert and Prof Zajicek was apparently only being relied upon due to Prof Brück's lack of clinical experience of the tolerability of GA, the Defendants elected to rely upon Prof Zajicek's evidence in preference to that of Prof Brück where they overlapped. To this end, the Defendants produced highlighted copies of Prof Brück's reports, with the highlighted passages (which extended beyond those which Prof Zajicek had previously expressly agreed with) being adopted by Prof Zajicek and omitted from Prof Brück's evidence. In addition, the Defendants called Prof Zajicek first, although I was informed that this was due to problems with his availability. Having cross-examined Prof Zajicek, counsel for the Claimants elected not to cross-examine Prof Brück on what little was left of his report.
Although an acceptable solution was thus arrived at, it should be clearly understood that conduct of this kind is unacceptable. Where parties adduce evidence from more than one expert, the evidence of the respective experts should be clearly delineated. Parties who flout the guidance which the courts have repeatedly given can expect to be heavily sanctioned in costs. This may extend to their legal advisors if the circumstances warrant such an order.
That is the kind of sentence which sends shivers down all our spines. Given that so much has changed in the context of the advent of a doctrine of equivalents, it is worth noting every point as it arises.
Evidence of equivalence
In Illumina v Premaitha, Henry Carr J briefly referred to the question of evidence of equivalence.
Having reached certain conclusions on the basis of normal interpretation, he found it unnecessary to determine Illumina's alternative case of infringement by equivalence. He said however ():
…in case I am wrong, I will briefly summarise my view on this issue. Had I rejected Illumina's primary case, it would have been on the basis that the Lo 1 patent was limited to direct detection. On that basis, I would not have been satisfied that the variant of indirect detection achieved substantially the same result in substantially the way as the invention, nor that this would have been obvious to the person skilled in the art at the priority date. No evidence was directed to this issue by Illumina, and I would have required evidence in the circumstances of this case.
The takeaway message from that is that evidence will always be required to support a claim for infringement by equivalence.
This point is actually quite clear from Lord Neuberger's judgment itself. He explained that the first step in his approach (the question of infringement as a matter of "normal interpretation") self-evidently raises a question of interpretation, whereas the second step - infringement by equivalence - raises a question which would normally have to be answered by reference to the facts and expert evidence.
Lord Neuberger specifically invited the deployment of expert evidence in those circumstances.
IPEC cost caps and settlement offers
In the case of OOO Abbott v Design & Display the question of an account of profits having been resolved at a second attempt by Judge Hacon, the issue of costs came to be assessed.
The outcome of the account was that Design & Display had made a small loss on the infringing business. Accordingly, no account of profits was to be awarded, and Design & Display was therefore to be treated as the successful party in the account, for cost purposes.
Design & Display had made a number of offers of settlement, none of which Abbott had beaten. Design & Display sought to have the IPEC costs cap lifted. Whether the offers made qualified as Part 36 offers was in dispute, but the judge did not think this mattered - it was the underlying principle which counted, this being that parties should be encouraged to make realistic offers and to respond realistically when an offer is made to them. This promotes settlement, the saving of costs, and further the saving of court time.
However, the judge felt that the disclosure given by Design & Display following the original liability hearing was inconsistent with this approach. The disclosure appeared to indicate a profit figure of around £105,000 which was subsequently revised down to £11,000 and then, a month later, to a £20,000 loss. Abbott sought no order as to costs (excluding the appeal).
The judge said that there was no excuse for Design & Display's "wildly inaccurate" evidence. He also noted another policy consideration in play here - that if an account of profits is to be conducted in an orderly and cost effective manner, it is essential that the evidence from the defendant is prepared with appropriate care. He said that on any view, Abbott had a good claim to its costs up to a reasonable period after the service of evidence revising the estimate down to £11,000.
The judge settled on the solution of not lifting the costs cap. He did not feel that the existence of the offers which were rejected was sufficient grounds to lift the cap in circumstances where Design & Display had provided inaccurate disclosure. The costs of the appeal should be paid on the standard basis and apportioned between the parties accordingly.
This simply reiterates a point we have already come to realise, namely that the judge in IPEC is very reluctant to lift the standard cap on an award of costs in IPEC.
In Warner-Lambert v Sandoz, Arnold J made a very rough assessment of costs in a hearing following his decision not to lift an interim injunction against Sandoz.
The judge had concluded that although there had been a material change in circumstances, such that the balance of injustice should be reconsidered, he felt that the balance of injustice still favoured the interim relief at that stage. Essentially, his reasons were the same as in his earlier (2015) decision in the same case. Accordingly he decided to make a summary assessment of Warner-Lambert's costs. Warner-Lambert sought £145,775 in costs for the hearing. The judge took a very blunt knife to that, and assessed the costs at £100,000, taking into account the hourly rates of Warner-Lambert's solicitors, the use of two partners in the case, and the failure to delegate work from a senior associate to more junior staff, as well as certain elements of Counsel's fees.
It is clear that the judges are prepared to look hard at issues of costs, and matters of file management by the lawyers acting.
In what would probably prove to be one of the last cases in relation to the old law of threats in the UK, John Baldwin QC, sitting as a deputy judge, considered the issue in the case of Icescape v Ice-World.
Referring to the now old law, section 70 of the Patents Act as it stood before this Autumn's amendments, the judge reviewed the conduct of the parties, noting that a first threatening letter was sent by Ice-World's Director of Sales and Marketing, followed by a number of further threatening letters from the Managing Director.
No witness evidence was provided to support a defence, just a validity opinion dated a year later than the first threat was made. The instructions upon which the opinion was based were not provided and the patent attorney did not appear to have considered priority. The court concluded that claim 1 of the patent was not supported by the matter disclosed in the priority document and so the priority of the patent was the filing date and not earlier. Ice-World therefore conceded that the patent was invalid.
The deputy judge considered the opinion to have no value at all, saying ():
…In circumstances where a party chooses not to lead evidence about the state of mind of a particular individual where that state of mind might be highly relevant and there is no explanation offered, the court will be slow to infer a state of mind in his favour. Indeed, it is hard to conceive of a state of affairs where it would do so, there being no reason for it.
Updated threats law
On 1 October 2017, changes to the Patents Act threats provisions were introduced by the Intellectual Property (Unjustified Threats) Act 2017.
The 2017 Act seeks to harmonise, across the different intellectual property rights subject to threats regimes, what can and cannot be said without falling foul of the provisions restricting the making of unjustified threats of infringement proceedings. The most significant changes are in respect of registered trade marks (UK and EU) and registered and unregistered designs (UK and "Community" (EU)), because the threats regimes for those rights have been brought into line with that for patents.
Across the board, additional protection has been provided for professional advisers. Provided legal advisers comply with the requirements of the Act, their communications are now much less likely to be capable of amounting to a threat. This removes a tactical weapon which has at times been deployed by an alleged infringer to drive a wedge between a proposed claimant and its legal team.
For patents (and the other IP rights the subject of the regime), there is a notable change to the definition of a threat. Before October's change to the law, the restriction was concerned with threats to sue in a UK court; it is now concerned with threats of proceedings for infringement in the UK of the relevant patent (or other IP right). The change enables the UK's threats regime also to apply to new 'Unitary Patents', when the Unified Patents Court and Unitary Patent regime come into force. As previously, the regime continues to apply to UK patents and UK designations of European patents.
There is only one place to start on this issue, and that is the voluminous decision of Birss J in Unwired Planet v Huawei (non-technical), at 806 paragraphs and over 87,000 words, the longest judgment of 2017 in a patent case.
This is the judgment following the "non-technical" trial which took place after the technical trials relating to validity and infringement/essentiality of a number of patents. After three technical trials had taken place, the parties agreed to postpone any further technical trials indefinitely. The idea was to await the outcome of the FRAND decision, which may then be capable of being applied to resolve all outstanding issues. It is the first judgment of its kind. The non-technical trial addressed the issues of competition law, FRAND, injunctive relief and damages for past infringements.
Birss J attempted to cut through the existing case law in theory to find a pragmatic way to resolve FRAND disputes. He concluded inter alia that:
- the boundaries of FRAND and competition law are not the same - it is possible for an offer not to be FRAND, but also not to breach competition law;
- there is only one set of licence terms which are FRAND in a given set of circumstances;
- the scheme as set out by a Court of Justice of the European Union in Huawei v ZTE does not lay down a bright line whereby any deviation is an abuse or necessarily deprives the patentee of injunctive relief.
Telecommunications standards worldwide are formulated and set by standards setting organisations (SSOs); in Europe the relevant SSO is ETSI. SSOs require the holders of patents which are essential to the standards (Standard Essential Patents - "SEPs") to indicate whether they are prepared to give an undertaking to licence on "[fair] reasonable and non-discriminatory" ([F]RAND) terms.
The ETSI FRAND undertaking has been considered in courts all over the world, as well as arbitration panels. The underlying purpose of the FRAND undertaking, said Birss J, is to secure a proper reward for innovation whilst avoiding "hold up" of implementers/implementation by the SEP owner. The judge said he agreed with the succinct summary of the purpose of FRAND given by the Guangdong High People's Court in the Huawei v InterDigital case in China:
For good faith users who are willing to pay reasonable royalties, holders of standards-essential patents should not directly refuse to grant licenses. On the one hand, it is necessary to ensure that patentees can obtain sufficient returns from their technical innovations. On the other hand, holders of standards-essential patents should be prevented from charging exorbitant royalty rates or attaching unreasonable terms by leveraging their powerful position forged by the standards. The core of the FRAND obligations lies in the determination of reasonable and non-discriminatory royalties or royalty rates
Birss J found that FRAND issues are justiciable in an English Court and enforceable in that Court. He said that it is not necessary to rely on competition law to enforce a FRAND undertaking. The boundaries of FRAND and competition law are not the same. A rate may be above the FRAND rate, but still not contrary to competition law.
The legal effect of the FRAND undertaking relating to a SEP is not that the implementer is already licensed. Its effect is that an implementer who makes an unqualified commitment to take a licence on FRAND terms (settled in an appropriate way) cannot be the subject of a final injunction to restrain patent infringement. On the other hand, an implementer who refuses to take a licence on terms found by the court to be FRAND has chosen to have no licence, and so if they have been found to infringe a valid patent, an injunction can be granted against them.
FRAND characterises the terms of the licence, but also refers to the process by which a licence is negotiated. Although an implementer does not owe a FRAND obligation to ETSI, an implementer who wishes to take advantage of the patentee's FRAND obligation must themselves negotiate in a FRAND manner.
Offers in negotiations which involve rates higher or lower than the FRAND rate but which do not dispute or prejudice the negotiation, are legitimate.
The court cannot craft a set of FRAND terms out of "thin air". However, the court's jurisdiction is not restricted to the binary question of assessing a given set of terms, but extends to deciding between rival proposals and coming to a conclusion different from either side's case on such a proposal.
Birss J set out the fundamental principles behind the question of a FRAND approach saying that when assessing what is and is not FRAND, the question is what would be fair, reasonable, and non-discriminatory. Asking what a willing licensor and a willing licensee in the relevant circumstances acting without hold-out or hold-up would agree upon is likely to help decide that question. The evidence of the parties themselves will be relevant, including evidence of how negotiations work in practice in the industry. The decisions of other courts, assuming they are not binding authorities, may be useful as persuasive precedents. However evidence of what a party is paying as a result of a binding arbitration may not carry much weight; an arbitrated licence without the arbitral award was not considered in this case to be a persuasive authority.
The judge said that the appropriate way to determine a FRAND royalty is to determine a benchmark rate which is governed by the value of the patentee's portfolio. That will be fair, reasonable and generally non-discriminatory. The rate does not vary depending on the size of the licensee (although the judge did not elaborate as to what he meant by this). It will eliminate hold-up and hold-out. Smaller new entrants are entitled to pay a royalty based on the same benchmark as established large entities.
The non-discrimination limb of FRAND does not consist of a further "hard-edged" component which would justify a licensee demanding a lower rate than the benchmark rate because that lower rate had in fact been given to a different but similarly situated licensee. If FRAND does include such a component, then that obligation would only apply if the difference would distort competition between the two licensees.
To the extent they are available, other licences may be deployed as comparables, just as comparables may be useful in a damages enquiry or in determining the terms of a licence of right or in the Copyright Tribunal. The relevance of comparables is that they are evidence of what real parties in real negotiations have agreed upon. But like any real situation, many factors may have been in play which make the licence less relevant. The negotiations may have involved a greater or lesser degree of hold up or hold-out and it may be impossible to know that from the evidence available.
Accordingly, a FRAND rate can be determined by using comparable licences if they are available. Freely negotiated licences are relevant evidence of what may be FRAND.
The judge undertook an exercise in considering comparable licences, which I will not deal with in detail, but which demonstrates the somewhat problematic and rather unpredictable nature of such an approach.
A "top down" approach can also be used, in which the rate is set by determining the patentee's share of relevant SEPs and applying that to the total aggregate royalty for a standard, but this may be more useful as a cross-check. Short of the disproportionate task of evaluating every single patent thoroughly in order to compare each one with all the others, one can only ever hope to analyse SEPs in broad categories and it is not meaningful to attempt to weigh the value of individual patents within these categories against one another. Accordingly, in assessing a FRAND rate, counting patents is inevitable.
The judge said that the patent counting approach works in the following way ():
Starting form a portfolio of declared SEPs, the first task is to divide a number representing the Relevant SEPs. "Relevant SEPs" is my term, coined after the trial had finished and intended to avoid language used in the case which can be confusing such as "truly essential patents" or "deemed". Both sides' approaches require making an assessment of the Relevant SEPs somehow. The parties do not agree how it should be done but one way or another a number is produced. Armed with that information it is possible to scale one company's rate relative to another to derive the factor R or to find the share of the total and derive S.
In this case the judge considered there to be over-declaration of patents in the SEP context. He said that this creates an incentive to err on the safe side and so, if in doubt, declare, because determining essentiality is not easy, standards vary over time and patent claims can be amended over time. The fact that rates are negotiated by counting patents creates a diverse incentive to declare as many patents as possible, making over-declaration worse.
Both parties were criticised in this respect, though rather Huawei more than Unwired Planet.
Taking all these factors into account, the judge concluded upon a set of rates which comprise benchmark FRAND rates for the Unwired Planet portfolio. As a cross-check he noted that the total aggregate royalty burden implied by these rates for 4G handsets was 8.8%, and for TG, 3G and 4G infrastructure and handsets ranged from 3.1 to 8.8 per cent.
This meant that none of the offers made by Unwired Planet involved rates which were FRAND. They were all too high. The benchmark rates on which Huawei's offers were based were not FRAND either. They were too low.
My impression on reading this judgment is that someone had to start somewhere. It was an extremely difficult task to undertake this exercise, and Birss J has done the best he could in the circumstances. The exercise is, it seems to me, one based on narrowing the gap as far as possible using general principles, before applying more detail, to reach the final conclusion. The issue with which I cannot concur is that, in any given case, there can only be one FRAND rate. I fail to see the logic in assuming that it is impossible for there to be a "FRAND band" of fair rates which the parties may apply or which can be flexed due to the particular circumstances in question. However, I can see the logic in his position and, as I have said, it provides a strong starting point. I doubt that this will be the last we hear of these issues, and aspects of the judgment will be reviewed periodically in the years to come.
I will return to the competition law aspects in Competition Law, Settlement and Licencing.
Links to the other sections of the Annual Patents Review 2017 are below.
- Technical Matters and Procedure
- Competition Law, Settlement and Licensing
- Employee Inventor Compensation
- Summary and Conclusions
Download the Annual Patents Review 2017 in full.
 Improver Corpn v Remington Consumer Products Ltd  FSR 181
 Kirin-Amgen Inc & Ors v Hoechst Marion Roussel Limited & Ors  UKHL 46
 Kirin-Amgen Inc v Roche Diagnostics GmbH  EWHC 518
 Actavis UK Limited & Ors v Eli Lilly and Company & Ors  UKSC 48
 Wood v Capita Insurance Services Ltd  2 WLR 1095
 Generics (U.K.) Limited & Anr v Yeda Research and Development Company Limited & Anr  EWHC 2629 (Pat) (26 October 2017) Arnold J
 Actavis Group PTC EHF & Anr v ICOS Corporation & Anr  EWCA Civ 1671 (1 November 2017) Lewison, Kitchin & Floyd LLJ
 Fisher & Paykel Healthcare Limited & Anr v ResMed Limited & Anr  EWHC 2748 (Ch) (10 November 2017) Mr Richard Meade QC
 Illumina, Inc & Ors v Premaitha Health Inc & Ors  EWHC 2930 (Pat) (21 November 2017) Henry Carr J
 Saab Seaeye Limited v Atlas Elektronik GmbH & Anr  EWCA Civ 2175 (19 December 2017) Kitchin & Floyd LLJ
 Virgin Atlantic Airways Limited v Premium Aircraft Interiors UK Limited  EWCA Civ 1062
 https://www.supremecourt.uk/cases/uksc-2017-0078.html; https://www.supremecourt.uk/cases/uksc-2017-0069.html; https://www.supremecourt.uk/cases/uksc-2016-0197.html; https://www.supremecourt.uk/cases/uksc-2016-0197.html
 Fujifilm Kirin Biologics Co., Ltd v AbbVie Biotechnology Limited & Anr  EWCA Civ 1 (12 January 2017) Longmore, Kitchin & Floyd LLJ
 Fujifilm Kirin Biologics Company Limited v AbbVie Biotechnology Limited  EWHC 395 (Pat) (3 March 2017) Henry Carr J
 Messier-Dowty Ltd & Anr v Sabena SA & Ors  1 WLR 2040
 Generics v Yeda  EWHC 2629 (Pat) (26 October 2017) Arnold J
 Perry v Brundle & Ors  EWHC 678 (IPEC) (30 March 2017) HHJ Hacon
 OOO Abbott & Anr v Design & Display Limited & Anr  EWHC 932 (IPEC) (26 April 2017) HHJ Hacon
 Napp Pharmaceutical Holdings Limited v Dr Reddy's Laboratories (UK) Limited & Ors  EWHC 1433 (Pat) (8 June 2017) Birss J
 Permavent Limited v Makin  EWHC 2077 (Pat) (24 July 2017) Daniel Alexander QC
 Unwired Planet International Ltd v Huawei Technologies Co. Ltd & Ors  EWHC 711 (Pat) (5 April 2017) Birss J; re-published with fewer redactions as  EWHC 2988 (Pat) (30 November 2017) Birss J
 Generics (U.K.) Limited & Anr v Yeda Research and Development Company Limited & Anr  EWHC 2629 (Pat) (26 October 2017) Arnold J
 Illumina, Inc & Ors v Premaitha Health Inc & Ors  EWHC 2930 (Pat) (21 November 2017) Henry Carr J
 OOO Abbott & Anr v Design & Display Limited & Anr  EWHC 2975 (IPEC) (22 November 2017) HHJ Hacon
 Warner-Lambert Company LLC v Sandoz GmbH & Anr  EWHC 216 (Pat) (13 February 2017) Arnold J
 Icescape Limited v Ice-World International & Ors  EWHC 42 (Pat) (23 January 2017) Mr John Baldwin QC
 Unwired Planet International Ltd v Huawei Technologies Co. Ltd & Ors  EWHC 711 (Pat) (5 April 2017) Birss J; re-published with fewer redactions as  EWHC 2988 (Pat) (30 November 2017) Birss J
 Huawei v ZTE (Case C-170/13) 16th July 2015  Bus LR 1261