ON APPEAL FROM THE HIGH COURT OF JUSTICE
PATENTS COURT (LEWISON J.)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE JACOB
LORD JUSTICE PATTEN
| VIRGIN ATLANTIC AIRWAYS LIMITED
|- and -
|PREMIUM AIRCRAFT INTERIORS UK LIMITED & ANOR
Mark Vanhegan QC and Brian Nicholson (instructed by Wragge & Co LLP) for the Respondent
Hearing dates : 1st and 2nd February 2011
Crown Copyright ©
Lord Justice Patten :
"49. Now it is true that in an inquiry as to damages or account of profits the patentee is allowed to claim relief for types of alleged infringement not ruled on by the trial court. This saves the formal issuance of fresh proceedings in respect of these and is permitted as a matter of convenience, see General Tire v Firestone  RPC 203 at p.207). And of course if, in the inquiry or account, the patentee alleges a type of infringement not considered by the trial court, the court conducting the inquiry or account will have to rule on whether it falls within the scope of the patent. But so far as the originally pleaded and proved type of infringement is concerned the matter is res judicata not merely as to an issue but as a cause of action in respect of that type of infringement.
50. Applying that to this case, it has not only been decided that the patent is valid, but also that the two types of infringement pleaded, "Snap-Fit" and "Berry" infringe. So, as Arden LJ pointed out in the course of argument, the cause of action for infringement has now merged with the judgment. At least for the infringements prior to the judgment (and there are none thereafter), Unilin simply no longer has any cause of action for infringement. It has a judgment instead.
80. The flaw in the argument is that it is obviously wrong to regard the first instance decision as "final". It was not. It was under appeal - the very negation of it being final. As Mummery LJ said in the course of argument: "an appeal is just a continuation of existing proceedings. Res judicata does not get a look in." The fact that certain grounds originally relied upon were no longer relied upon is not enough to make the decision below final. I think the Inner House would be astonished to be told that its decision had a bearing on the point we have to decide."
"The question here is whether this estoppel, as between the Plaintiff and the Defendant, remains a living and effective estoppel, notwithstanding the subsequent revocation of the Patent, so as to prevent the Defendant from reopening this question, which, as between him and the Plaintiff, has been decided once and for all. In my opinion that remains a good estoppel, and there is no estoppel on an estoppel as suggested by Mr Walter, and the appeal must be dismissed."
Fletcher-Moulton LJ at page 663 said that:
"The judgment obtained by the Plaintiff against the Defendant settled for ever, as res judicata between those two parties, that this Patent was valid and that it was infringed during the period that it was valid. So far as those issues are concerned the cause was terminated, but an inquiry was necessary to ascertain the damages. In fact such an inquiry takes time, but for all legal consequences it may be supposed to be instantaneous and to take place at the moment when the judgment is pronounced."
At page 664 Buckley LJ said that:
"A Patentee sued a Defendant for infringement, and he succeeded, and obtained a judgment, the substance of which was that his Patent was valid, and an inquiry was directed as to damages sustained by the Defendant's wrongful infringement of that valid Patent. As between those parties there was a complete estoppel. It was res judicata, subject to two exceptions. In the first place, of course, it was not an estoppel, if the Defendant appealed. However, he did not appeal. Secondly, it was not an estoppel, if he presented a Petition for revocation of the Patent. That was decided, I think, in Deeley's Patent 12 RPC 192. He did present a Petition for revocation of the Patent. The material thing to notice is that he did that, not in his own character – the character in which he had been sued as a Defendant for infringement – but as a representative person. For that purpose he was the public, and he said that the Patent ought not to remain in existence. He succeeded in getting the Patent revoked. The question then is, - in the inquiry as to damages which had been directed in the action, is the Patentee estopped from denying the invalidity of the Patent as established by the judgment in the Petition for revocation?
I am not so clear upon this question, I confess, as my learned brothers are, but I can see a reason for answering the question in the same direction, and my reasons for concurring in the judgment are these."
"6. Miss Pickard advanced another reason why there should be a stay of the inquiry. Currently the patent in suit is under opposition by Contour and others in the European Patent Office. The opposition division has dismissed the opposition, but there is an appeal to the Technical Board of Appeal currently due to be heard on 20 April next year. Suppose, she said, the appeal is successful. It would be wrong for Contour to have to pay any damages, so a stay should be granted to allow for that contingency.
7. There are two answers to that contention. The first is quite conventional. I see no reason why, even if the decision with the Technical Board of Appeal could have the effect of completely annulling our decision, just like a reversal by the Supreme Court, the general rule entitling a successful patentee to pursue his inquiry at his own risk as to costs while an appeal is pending should not apply.
8. The second reason is equally valid. A subsequent revocation of a patent by the Technical Board of Appeal does not have the effect of completely annulling a final earlier order to the contrary in our national court. This court held in Unilin Beheer BV v Berry Floor NV  EWHC Civ 364;  FSR 625 that where the issues of infringement and validity had been finally determined in our courts the matter is res judicata as between the parties. If the patent is subsequently revoked in proceedings in the EPO, that affects the future, in that any injunction restraining infringement for the patent would lapse when the patent is revoked. But the entitlement to damages remains because it is res judicata in our courts as between the parties.
9. Miss Pickard realistically accepted that that was the effect of Unilin. And that meant there was no basis for a stay of the inquiry because of the pending EPO appeal. So she changed tack. If there was to be no stay because of the rule in Unilin, then she wanted leave to appeal to the Supreme Court to attack that rule. I would refuse that application.
10. The rule in Unilin effectively stretches back to the Poulton v Adjustable Cover  2 Ch 430. Moreover, if the position were otherwise the Patents Court would be partially emasculated. No truly final order could be made until the very often long drawn-out EPO opposition procedure was over. Business could not know in a reasonable time where it stood. Things would be provisional for far too long. Wary or perhaps well-advised inventors might indeed eschew the European Patent Office altogether and apply for a national patent instead -- there is no opposition procedure here -- for fear that an EPO opposition would make their patents only incompletely or contingently enforceable for the whole period of the opposition."
(a) Contour should pay to Virgin the sum of £10,000 per seat;
(b) Contour's parent company (Seton House Group Limited) should provide a guarantee to Virgin to pay any damages which are ultimately held to be payable in respect of the remaining seats over and above the sum of £10,000 per seat; and
(c) Delta should give Virgin a contractual undertaking not to use the planes fitted with the remaining seats on the London-New York route.
"My reasons briefly are as follows. The £10,000 per seat sum is indeed substantial. It will amount to £4 million. There may well be some force in saying it is too high judging by the Air New Zealand rate as a comparison, but this is no place to make any evaluation of that. Mr Meade submitted that the patent was fundamental. He may be right. On the other hand Air New Zealand's main interest may have been the flipover bed which is supposed to be particularly comfortable. I am not impressed by Miss Pickard's "more than the profit" point. Contour negotiated the contract with Delta knowing the risk if it priced that too low and without regard to Virgin Atlantic's intellectual property rights. That explains but does not justify the position it finds itself in. Besides if the sum is too much compared with the sum ultimately held appropriate, on the inquiry to damages not only would Virgin Atlantic be able to repay but more significantly that inquiry would also cover the 2,800 seats already supplied. Any overpayment on the 400 will most likely not amount to an overpayment altogether, so in a way the overpayment, if such it proved to be, would be in the nature of interim damages."
(i) the setting aside of paragraphs 1-8 of the order. This would include the declarations that the Patent was valid and infringed but Contour propose that they should be replaced by new declarations which make it clear that the Patent referred to is the Patent in its unamended form. The contentious part of the application relates to the discharge of the order for an inquiry as to damages contained in paragraph 7. As already mentioned, the injunction contained in paragraph 4 was discharged by the order of 1st December 2010 and the delivery of the last remaining ship-set of Solar Eclipse seats under the existing contract with Delta is excepted from the order for delivery up contained in paragraph 5 subject to the payment of the £10,000 per seat;
(ii) the variation of the first undertaking by substituting for the words "whilst the patent remains in force" the words "whilst the Respondent remains subject to the injunction set out at paragraph 4 of this order". This part of the application is made under the slip rule (CPR 40.12) and is designed to correct what is alleged to have been a mistake in the form of the order. The existing wording means that Delta will remain unable to operate any of the aircraft fitted with the 9 sets of Solar Eclipse seats comprised in the carve-out on the London-New York route even though the injunction has now been discharged. Contour say that the parties and the Court intended that this restriction should only continue so long as the supply of Solar Eclipse seats would be an infringement of the patent and that the restriction should therefore have been limited to the duration of the injunction. The amendment is primarily designed to enable Delta to seek rectification of the contractual undertakings it has given to Virgin in relation to the 9 ship-sets. It is not suggested that the undertaking has any application to future orders of Solar Eclipse seats;
(iii) the release of Contour from all three undertakings in the order and the repayment of the £3.6 million so far paid to Virgin for the ship-sets delivered under the carve-out. As things stand, only one of the 9 ship-sets remains to be delivered which would occasion a further payment of £450,000 if the third undertaking to pay £10,000 per seat remains in effect.
The orders for an inquiry as to damages and for delivery up
"At first sight, the effect of the amendments to claim 1 would not appear to make any difference on infringement or validity. Even so, the position is that there has been no conclusion as to infringement or validity of amended claim 1. In my view, it cannot be right to grant an injunction to restrain infringement of an amended claim where there has been no finding of infringement, nor would it be right to grant an inquiry as to damages on the same basis.
The problem of relief when a patent is amended is not new (see Dudgeon v. Thomson (1877) 3 App. Cas. 34 , and Kenrick & Jefferson Ltd.'s Patent (1912) 29 R.P.C. 25 ). The practice of this court is that, after amendment, a patentee must start a fresh action rather than seek to enforce any relief he has obtained in a previous action. That practice is based upon the fact that there has been no judgment on infringement and validity in relation to the amended patent."
"The original specification may have complied with all the exigencies of the law, and been such as is requisite in the case of every patent, but the amended specification may be wanting in all those qualities which are required by the statute. And yet not one of those issues has been decided against the Respondents in this case; nay more, not one of those issues could be decided in the present proceedings, because, when the Appellant appeals to the Court to enforce its interdict granted in the former action, the Respondents are obliged to confess that in that former action the questions of novelty, of utility, and of sufficiency of the specification are all res judicata, already decided against them. My Lords, without going beyond that, and pointing out that upon the factum of infringement that which would be an infringement of the old specification may be none whatever of the new specification, the former considerations alone would satisfy your Lordships, I think, how extremely irregular it was in those who were engaged in this proceeding in Scotland to suppose that after the memorandum of alteration and the disclaimer the question of enforcing the old interdict could be entertained by the Court."
The release of the second and third undertakings and the repayment of the £3.6 million
The first undertaking
Lord Justice Jacob :
Lady Justice Smith :
AND UPON THE APPLICATION of the Respondent for an order that the injunctive relief be stayed or limited, to permit the Respondent to fulfil its contractual obligations to Delta Air Lines Inc and that any inquiry as to damages be stayed pending the decision of the Board of Appeal in the European Patent Office, and if the Patent is held to be invalid by the European Patent Office, that there shall be no inquiry as to damages and no damages will be payable
AND UPON the Respondent undertaking not to make any delivery of any Solar Eclipse seats before procuring a contractual undertaking from Delta Air Lines Inc enforceable by Virgin Atlantic Airways that Delta Air Lines Inc will not use any of said products to be delivered on any transatlantic flight between the USA and the UK which are directly competitive with Virgin Atlantic Airways, including in particular flights between London Heathrow and New York JFK airports, whilst the patent remains in force
AND UPON the Respondent undertaking not to make any delivery of any Solar Eclipse seats before procuring from Seton House Group Limited a guarantee in relation to any and all damages that may be awarded in the enquiry as to damages relating to the exclusions from the injunction herein and in particular in relation to each of the 9 shipsets identified as existing contractual obligations under the Delta Air Lines Inc Contract referred to in the witness statement of Mr Gordon Harris dated 5th November 2009
AND UPON the Respondent undertaking to make a payment to the Appellant within 14 days of the delivery of each complete shipset of £10,000 per seat, such payments to be made in relation to each of the 9 shipsets identified as existing contractual obligations under Delta Air Lines Inc Contract referred to in the witness statement of Mr Gordon Harris dated 5th November 2009
AND ON allowing the Appellant's appeal by Judgment dated 22 October 2009
IT IS CERTIFIED that
1) the validity of European patent (UK) No 1,495,908 ("the Patent") was contested unsuccessfully
AND IT IS DECLARED that
2) the Patent is valid
3) the Patent is infringed by the activities of the Respondents as set out in the Re-Amended particulars of Infringement
AND IT IS ORDERED that
4) the Respondent shall not, whether acting by their directors, officers, employees, agents or otherwise howsoever infringe the Patent
5) the Respondent shall, within 14 days of this Order, and at their own expense, deliver up or (at the Appellant's option) destroy upon oath all material in their possession, custody, control or power which infringes the Patent
6) provided that it shall not be a breach of this Order and in particular of paragraphs (4) and (5) above, for the Respondent to take such steps as are reasonably practicable to fulfil its existing contractual obligations under the Delta Air Lines Inc Contract as referred to in the witness statement of Mr Gordon Harris dated 5th November 2009
7) there be an enquiry as to damages for infringement of the Patent and payment by the respondent to the Appellant of all sums found to be due together with interest thereon pursuant to s35A Senior Court Act 1981 and/or the equitable jurisdiction of the Court, at such rate and for such period as the Court thinks fit
8) there be liberty to apply for directions generally in relation to the aforesaid enquiry
9) the Respondent shall pay to the Appellant the Appellant's costs of the appeal, such costs to be the subject of a detailed assessment and assessed on the standard basis if not agreed
10) the Appellant shall pay to the Respondent 20% of the Respondent's costs of the action at first instance, such costs to be the subject of a detailed assessment and assessed on the standard basis if not agreed
11) the Respondent shall repay to the Appellant £480,000 of the payment of £562,500 made on account of costs pursuant to CPR44.3(8) by the Appellant to the Respondent together with interest thereon at the rate of 2.5% above US LIBOR and fluctuating therewith for the period from the date of receipt of such sum by the Respondent to the date of receipt of the repayment thereof by the Appellant on or before Monday 18th January 2010
12) permission to appeal to the Supreme Court, in relation to both infringement and validity, and in relation to the Unilin Beheer v Berry point, is refused
13) the figure pertaining to the size of licence fees under the Appellant's licence agreement with Air New Zealand has been designated as confidential and shall remain confidential notwithstanding the reference to that figure in open court during the course of the 18 December 2009 hearing by counsel for the Respondent".