16 August 2013

Virgin flat bed case raises common-sense principle

A recent Supreme Court patent decision avoided the absurd result of a defendant having to pay damages under a patent whose relevant claims were invalidated between trial on liability and on damages, says Susan Hall of UK law firm Clarke Willmott.

Virgin lost patent infringement case last month against Zodiac Christopher Parypa

The decision, however, leaves some complex choices up to patent litigators in future. It also casts critical scrutiny on Patents Court practice in being reluctant to stay proceedings on validity when parallel proceedings are on foot in the EPO. The case could twice have been avoided by the grant of such a stay by the Court of Appeal.

Detailed assessment

On 3 July judgment was given in the case of Virgin Atlantic Airways Limited (Virgin) against Zodiac Seats UK Limited (Zodiac) [2013]UKFC46 by a five member Supreme Court under the presidency of Lord Neuberger.
This brought to an end a long-running, very high value patent infringement case between Virgin and Zodiac.  Virgin, who had been successful at all the previous levels of court in England and Wales, had been claiming damages for patent infringement in excess of £49,000,000 and had already received an award of costs and order for delivery up, together with an interim sum of £3,600,000 on account of loss.  Virgin lost in the Supreme Court and was ordered to repay money already paid and costs.

Overlapping jurisdictions

The case is not only interesting in how it deals with the overlapping jurisdiction of the European Patent Office ('EPO') and the courts of signatory states, such as the High Court in England and Wales when it comes to issues on patent validity.  It also considers in some detail estoppel and when a issue raised in one court can prevent the same issue or a related being raised in other courts by the same or related parties.  
The precise combination of events is likely in the short term at least to increase the amount of concurrent actions, in that anyone claiming under a patent or defending a patent may have to cover all bases to avoid being caught by issues of estoppel. 

The facts

Virgin has a 2007 patent for a "seating system and passenger accommodation used for a vehicle" which allows seats to be turned into flat beds ("the Virgin Patent").  Virgin sued Zodiac, who manufactured seating units called the 'Solar Eclipse' which, it was alleged, infringed the Virgin Patent.  Zodiac raised defences of non-infringement and invalidity on grounds of prior art and added matter.  At first instance the Patents Court judge held the Virgin Patent was not infringed but indicated he would have accepted Zodiac's case on invalidity (had he had to so do) on added matter but not on prior art.  At the same time parallel proceedings in the opposition division of the EPO upheld the Virgin Patent subject to minor amendments.  Zodiac appealed to the Technical Board of Appeal (TBA) of the EPO.

Stay of proceedings refused

In the UK Court of Appeal Lord Justice Jacobs refused a stay of proceedings pending the TBA hearing ant the appeal court found that the Virgin Patent was valid and infringed.  They specifically rejected the argument on prior art. The TBA decision however, brought bad news for Virgin.  All the claims found infringed in the English action were invalidated by reason of prior art.  Furthermore, the TBA accepted proposed amendments by Virgin which deleted these claims from the Virgin Patent.  It was now quite clear that:

1.The patent claims which Zodiac had been found to infringe were now found invalid
2.The Zodiac system did not infringe the Virgin Patent as amended
3. Notwithstanding (1) and (2) Zodiac remained subject to an enquiry as to damages.

The Court of Appeal held that they were bound by prior cases to treat the Virgin Patent as valid for the purposes of the enquiry because of the doctrine of cause of action estoppel or res judicata.
The Supreme Court rejected this contention. 

Estoppel

They examined a number of different types of estoppel.  First, full blown cause of action estoppel, preventing a claimant suing twice on the same facts, to get a different outcome or additional damages.  Second, merger which treated a cause of action as extinguished once judgement had been given leaving them with only the option of suing on the judgment. Third, issue estoppel which prevented an issue which had been decided in related proceedings between the same parties being raised in subsequent proceedings. 

Finally, they considered the principle in Henderson -v- Henderson which is the rule that precludes the party from raising in subsequent proceedings matters which were not raised but could and should have been raised in the earlier ones.  This latter rule had been approved by the House of Lords case of Johnson -v- Gore-Wood & Co [2002] 2AC1 and does indeed cause very real problems for IP practitioners who may be trying steer a course keeping things short and to the point by limiting causes of action and on the other hand avoiding prejudice to their client resulting from not being allowed to raise those causes of action at a later date. 

Common sense

There are interesting dicta in Virgin -v- Zodiac on the applicability on all the forms of estoppel, but their lordships concluded that no estoppel prevented them from applying common sense.  They were not being asked to re-litigate the question of validity: they were asked to apply new facts which had not (and could not have been) before the court deciding liability.  That is, the patent was now invalid in all material respects and a decision on patent invalidity operates in rem (ie. binds everyone) and is backdated to the date of patent grant.

Conclusion

The Supreme Court reached a common sense result but the messages for litigators are not entirely positive.  It reinforces the view that all courses of action need to be kept on foot, such as running parallel proceedings in the EPO with infringement proceedings in the Patents Court.  "Never give up" has to be the message where there is a chance of proving invalidity.

Susan Hall is a partner at UK law firm Clarke Willmott specialising in Intellectual Property and Information Technology

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