COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION , PATENTS COURT
London, WC2A 2LL
B e f o r e :
LORD JUSTICE NEUBERGER
SIR MARTIN NOURSE
| COFLEXIP S.A. AND ANOTHER
|- and -
|STOLT OFFSHORE MS LTD. AND OTHERS
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr. Roger Henderson Q.C. and Mr. Tom Hinchliffe (instructed by Messrs Bird and Bird of London) for the Appellants
Crown Copyright ©
Lord Justice Neuberger:
i) In paragraph 1, that Stolt had infringed "by using the process described in the Specification" of the Patent and by, inter alia, "using and/or keeping a product made in accordance with the invention described in the Patent";
ii) In paragraph 2, that "in particular" Stolt had kept and used a vessel called the Seaway Falcon "together with the Flexible Laying and Module Handling Systems installed therein" in the "Magnus Swift Field in the North Sea for the purposes of laying flexible flowlines for British Petroleum plc" and that the Seaway Falcon together with the aforesaid system was "being offered for use and disposal" in connection with the laying of flexible flowlines more generally.
"[Stolt] carried out searches which they believed were appropriate and which they believed and still believe were reasonable. It was their decision not to search more widely and it is not right to allow them to reopen their case in this court. There are no exceptional circumstances which would make this an appropriate case for amendment requiring a new trial."
"This is not a case in which it can be said that the prior art on which [Stolt] now wish to rely would compel the court to hold that [Coflexip's] patent is invalid. The most that can be said is that [the fresh prior art] provides a further basis for [Stolt's] attack on the validity of [Coflexip's] patent. In those circumstances it is clear that, if [Stolt] cannot succeed without relying on the prior art which they seek to introduce by amendment, permission to reamend would, necessarily, lead to a retrial."
"The court should not allow a party to pursue its own private interests in a way which is wasteful of the court's resources under the guise of promoting an alleged public interest in challenging the monopoly conferred by the patent."
"That injunction makes no reference to the patent nor to the rights stemming from the patent. But it applies whether or not the patent lapses or is revoked and, unless an application is made to the court, it will continue even when the patent expires. It therefore needs some modification."
Accordingly, the Court of Appeal effectively substituted the more familiar form of injunction.
"(2) [Stolt] be restrained from infringing [the] Patent
(3) There be an inquiry as to damages suffered by [Coflexip] by reason of the acts of infringement of the Patent by [Stolt] or at [Coflexip's] option an account of profits made by [Stolt] by reason of such acts the Inquiry [to] proceed having regard to the contents of the judgment of [the Court of Appeal].
(4) [Stolt] pay Coflexip] all sums found to be due to [Coflexip] on the said account/or Inquiry together with interest thereon ."
Stolt was also ordered to pay the costs of the action, the counterclaim and the appeal.
i) the decision in Poulton is, on analysis, wrong.
ii) the law relating to res judicata, on which the reasoning in Poulton was based, has substantially relaxed since 1908;
iii) the provisions of the Patent Act 1977 ("the 1977 Act"), and in particular those relating to amendment, indicate that the law has been changed;
iv) the provisions of the Community Patent Convention ("the Convention") which was, of course, not in force in 1908, indicate a different conclusion.
Poulton -v- The Adjustable Cover & Boiler Block Co
"Now I think that on principle it is absolutely clear that a judgment for an injunction and an inquiry as to damages in an action for infringement does estop the defendant from setting up, on the inquiry, the invalidity of the letters patent. So far as the defendant is concerned, he is estopped from denying the validity of the letters patent at the date of the trial, which is the date with reference to which the inquiry as to damages is directed, and, of course, estopped from denying their validity at the date of the infringement in respect of which the inquiry as to damages is directed."
"I think it is obvious on the face of it, that a judgment for the revocation of a Patent would in effect put an end to the injunction, because the question whether a Patent has been infringed or not is a question to be tried at the date of the alleged infringement, and, if there is no Patent at that date because it was revoked, that would not be an infringement; so that in effect an Order for revocation of a Patent would in every case put an end to the injunction. But it does not follow from that that it would put an end to the inquiry as to damages which had been directed."
"principle of an estoppel upon an estoppel in the present circumstances, so as to avoid having to give the plaintiff in the action a sum by way of damages, when, as a matter of fact, the patent having been ab initio void, he has suffered no damage at all."
"In my opinion the judgment so obtained by the plaintiff made the question whether there had been an infringement by the defendants of a patent then valid, which had been granted to the plaintiff, res judicata as between the parties to the action, and operated as a complete estoppel between them"
"The question in this case appears to me to be whether the estoppel created as between the plaintiff and the defendants by the judgment in the action remains a binding and effective estoppel, notwithstanding the subsequent revocation of the letters patent, so as to prevent the defendants from reopening, upon the inquiry as to damages, the question of the validity of the patent, which had been decided as between them and the plaintiff in favour of the latter. In my opinion it remains a good estoppel, and there is no estoppel upon an estoppel as suggested."
"In this case a judgment was obtained by the plaintiff against the defendants, by which it became res judicata as between these parties that there had been infringement by the defendants of a patent granted to the plaintiff, which was then valid. As regards the issues of validity and infringement, the cause had then terminated, but there had to be an inquiry as to the amount of the damages. The order of revocation is in the nature of a judgment in rem which terminates the res, i.e., the letters patent, at the date when the order is made. It has in my opinion no further effect so far as estoppel is concerned."
"[T]he order made in the action was, in my opinion, a complete judgment inter partes. It contained a subsidiary order, which was made upon the basis that the patent was valid, and directed an inquiry to ascertain what, upon that footing, were the damages sustained by the plaintiff. The effect of this judgment was that the validity of the patent was for the purposes of the inquiry res judicata as between the parties to the action. That being so, the revocation of the patent on a petition subsequently presented cannot affect the estoppel so created, or estop the plaintiff from asserting upon the inquiry as to damages that the patent must be regarded as valid."
The argument that Poulton was wrongly decided
The argument that the law of estoppel has been modified since Poulton
The different types of estoppel
"arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter."
"[T]he bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the law of England, permit the latter to be re-opened."
"may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to re-open that issue."
"Cause of action estoppel extends also to points which might have been but were not raised and decided in the earlier proceedings for the purpose of establishing or negativing the existence of a cause of action."
"In Henderson v. Henderson (1843) 3 Hare 100, 114-115, Sir James Wigram V.-C. expressed the matter thus:
'In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.'
It will be seen that this passage appears to have opened the door towards the possibility that cause of action estoppel may not apply in its full rigour where the earlier decision did not in terms decide, because they were not raised, points which might have been vital to the existence or non-existence of a cause of action. The passage has since frequently been treated as settled law, in particular by Lord Shaw, giving the advice of the Judicial Committee of the Privy Council, in Hoystead v. Commissioner of Taxation  AC 155, 170. That particular part of it which admits the possible existence of exceptional cases was approved by Lord Kilbrandon in Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd.  AC 581, 590:
'The shutting out of a 'subject of litigation' - a power which no court should exercise but after a scrupulous examination of all the circumstances - is limited to cases where reasonable diligence would have caused a matter to be earlier raised; moreover, although negligence, inadvertence or even accident will not suffice to excuse, nevertheless 'special circumstances' are reserved in case justice should be found to require the non-application of the rule.'"
"That statement [sc. of Wigram VC in Henderson] includes the observation that there may be special circumstances where estoppel does not operate. The instant case is concerned with the nature of such special circumstances."
"In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings."
He then went on to consider the question:
" whether the further relevant material which a party may be permitted to bring forward in the later proceedings is confined to matters of fact, or whether what may not entirely inappositely be described as a change in the law may result in, or be an element, in special circumstances enabling an issue to be re-opened."
"It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before."
The special facts of Johnson, as emphasised by Lord Bingham's statement at 31A, suggest that it may not be a cause of action estoppel case, or an issue estoppel case, but a case of pure abuse of process. It may therefore be unsafe to rely on it to any great extent in any case such as the present, which is concerned with cause of action estoppel and/or issue estoppel.
The type of estoppel involved in this case
i) is based on abuse of process cause of action estoppel, rather than strict cause of action estoppel so far as the Magnus Swift contract is concerned;
ii) is based on issue estoppel so far as the fourteen other contracts are concerned.
Should effect be given to the estoppel in this case
"I consider that anyone not possessed of a strictly legalistic turn of mind would think it most unjust that a tenant should be faced with a succession of rent reviews over a period of over 20 years all proceeding upon a construction of his lease which is highly unfavourable to him and is generally regarded as erroneous."
To the same effect, he observed a little later at 110F:
"There is much force also in the view that the landlord, if the issue cannot be reopened, would most unfairly be receiving a very much higher rent than he would be entitled to on a proper construction of the lease."
"I consider that abuse of process would be favoured rather than prevented by refusing the plaintiffs permission to reopen the disputed issue."
There is no special public interest in whether a tenant pays too high a rent to his landlord under a lease. There is, however, rather more of a public interest in whether the grantee of a patent, which turns out to be invalid, is entitled to enforce that patent.
"The question therefore is whether, given a subsequent change in the law indicating that the earlier decision was wrong, the injustice of holding the plaintiff in the second action bound by the erroneous decision in law in the first action outweighs the hardship to the other party in having to relitigate the matter and the public interest in the finality of legal proceedings."
In a later passage, expressly approved by Lord Keith, Sir Nicolas referred to "the yardstick of whether issue estoppel should apply 'as being' the justice to the parties" (see 110H).
The argument based on the amendment provisions of the 1977 Act
"An order under this section may be an order for the unconditional revocation of the patent or, where the court determines that one of the grounds mentioned in subsection (1) above has been established, but only so as to invalidate the patent to a limited extent, an order that the patent should be revoked unless within a specified period the specification is amended under section 75 below to the satisfaction of the court ."
"An amendment of the specification of a patent under this section shall have effect and be deemed always to have had effect from grant of the patent."
"Where an amendment of the specification of a patent has been allowed under any of the provisions of this Act, no damages shall be awarded in proceedings for an infringement of the patent committed before the decision to allow the amendment unless the court is satisfied that the specification of the patent as published was framed in good faith and with reasonable skill and knowledge."
"As regards the issues of validity and infringement the case had terminated [with judgment], but there had to be an inquiry as to the amount of the damages. In point of fact, such an inquiry takes time, but as regards all legal consequences, it may be supposed to take place at the same instant as the determination of the other issue."
The Community Patent Convention
"An Act to establish a new law of patents ; to amend the law of patents ; to give effect to certain international conventions on patents; and for connected purposes."
"Whereas by resolution made on the signature of the Community Patent Convention the governments of the member states of the European Economic Community resolved to adjust their laws relating to patents so as (among other things) to bring those laws into conformity with the corresponding provisions of the European Patent Convention, the Community Patent Convention, and the Patent Co-operation Treaty, it is hereby declared that the following provisions of this Act that is to say, sections 72(1) and (2), 74(4) , are so framed as to have, as nearly as practical, the same effect in the United Kingdom as the corresponding provisions of the European Patent Convention, the Community Patent Convention, and the Patent Co-operation Treaty have in the territories to which those conventions apply."
"(1) A European patent application in which the Contracting States are designated and the resulting Community patent shall be deemed not to have had, as from the outset, the effects specified in this Chapter to the extent to the patent has been revoked.
(2) Subject to the national provisions relating either to claims for compensation for damage caused by negligence or lack of good faith on the part of the proprietor of the patent or to unjust enrichment, the retroactive effect of the revocation of a patent as a result of opposition or revocation shall not effect [sic]:
'(a) any decision on infringement which has acquired the authority of a final decision and been enforced prior to the revocation decision;
(b) any contract concluded prior to the revocation decision, insofar as it has been performed before that decision ."
"Subject to the following provisions of this Act, the court or the comptroller may on the application of any person by order revoke a patent for an invention on (but only on) any of the following grounds "
"If the grounds for revocation affect the patent only partially, revocation shall be pronounced in the form of a corresponding limitation of the patent. The limitation may be effected in the form of an amendment to the claim, the description or the drawings."
"provisions [in that Act] are so framed as to have the same effects in the United Kingdom as the corresponding provisions of the [Convention] have in the territories to which [that] Convention appl[ies]."
Lord Justice Peter Gibson and Sir Martin Nourse:
(1) Are the Appellants ("Stolt") estopped from relying on the revocation of the patent as a defence to the claim for damages on the inquiry as to damages?
That issue gives rise to a number of sub-issues:
(i) Is the decision of this court in Poulton v Adjustable Cover and Boiler Block Co.  2 Ch 430 one from which, subject to sub-issue (ii), we can and should depart?
(ii) If Poulton was correctly decided at the time,
(a) has the law then applicable been superseded by the Patents Act 1977 ("the 1977 Act"), and/or
(b) has the approach to estoppel in 1908 been discarded in favour of a broad merits-based approach as suggested by the House of Lords in Johnson v Gore Wood & Co.  AC1 ("Johnson")?
(iii) In relation to the 15 contracts made by Stolt, which are the subject of the inquiry,
(a) does cause of action estoppel or issue estoppel apply, and, if the latter,
(b) should Stolt be permitted to rely on the revocation as a defence to the claim for damages?
(2) Do the provisions in the 1977 Act relating to revocation of a patent have the same effects by reason of s. 130 (7) of the 1977 Act as those provided for in Art. 33 of the Community Patent Convention ("the CPC")?
That issue gives rise to three sub-issues:
(i) Is Art. 33 imported into the provisions in the 1977 Act relating to revocation by the words of s. 130 (7) "it is hereby declared that . sections 72 (1) and (2) . are so framed as to have, as nearly as practicable, the same effects in the United Kingdom as the corresponding provisions of . [the CPC]"?
(ii) Does the fact that the CPC has never been ratified and has never come into effect in any territory affect the applicability of Art. 33?
(iii) Are the terms of Art. 33 (2)(a) satisfied in the present case so as to prevent the revocation having retrospective effect?
(3) In any event should a stay of the inquiry be ordered until the validity of the patent is finally determined in the proceedings ("the Rockwater action") brought by Rockwater Ltd. ("Rockwater") against the Respondents Coflexip?
"In point of fact such an inquiry takes time, but, as regards all legal consequences, it may be supposed to take place at the same instant as the determination of the other issues."
An injunction, whilst granted because of the findings as to past infringements which the defendant cannot subsequently challenge, is expressed to restrain the party enjoined from future infringements. When the patent is subsequently revoked the court will not allow the injunction to continue because there is no patent then subsisting capable of being infringed. That does not undermine the correctness of the decision.
" . the inquiry as to damage in this case must . proceed on the basis of the judgment already given upon the issue as to the validity of the patent and its infringement by the defendants, a judgment which binds the parties and which is not affected by the subsequent proceedings for revocation."
See also para. 372 which firmly rejects the notion that a res judicata estoppel can be defeated by another estoppel or a cross-estoppel.
(ii) Post-Poulton changes in the law
(a) Statutory changes
"The particular type of estoppel relied upon by the husband is estoppel per rem judicatam. This is a generic term which in modern law has two species. The first species, which I will call "cause of action estoppel", is that which prevents a party to an action from asserting or denying, as against the other party, the existence of a particular cause of action, the non-existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist, i.e. judgment was given upon it, it is said to be merged in the judgment, or, for those who prefer Latin, transit in rem judicatam. If it was determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is estopped per rem judicatam. This is simply an application of the rule of public policy expressed in the Latin maxim "Nemo debet bis vexari pro una et eadem causa." In this application of the maxim "causa" bears its literal Latin meaning. The second species, which I will call "issue estoppel", is an extension of the same rule of public policy. There are many causes of action which can only be established by proving that two or more different conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was."
"In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings. One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result."
"It is appropriate to commence by noticing the distinction between cause of action estoppel and issue estoppel. Cause of action estoppel arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the law of England, permit the latter to be re-opened."
"The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all . It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before."
(iii) (a) Type of estoppel in this case
(b) Should Stolt be permitted to rely on the revocation
"Moreover there is this consideration concerning policy. If a defendant, having finally lost a patent action, knew that an application for successful revocation by another might get him off the hook of damages, he would have every motive for digging up better prior art and encouraging another to attack the patent. So although he himself could not re-litigate validity, one of the heads of public policy (re-litigation) behind the rule could be subverted indirectly."
(i) s. 130 (7)
(ii) Non-ratification of CPC
(iii) Art. 33 (2) (a) of the CPC