Strand, London, WC2A 2LL
B e f o r e :
| Finecard International Ltd
(T/A The Ninja Corporation)
|- and -
|Urquhart Dyke & Lord (A Firm)
Roger Wyand QC (instructed by Reynolds Porter Chamberlain) for the Defendants
Hearing dates: 1st November 2005
Crown Copyright ©
Peter Smith J :
THE INFRINGEMENT PROCEEDINGS
33.--(1) Any person who claims to have acquired the property in a patent or application for a patent by virtue of any transaction, instrument or event to which this section applies shall be entitled as against any other person who claims to have acquired that property by virtue of an earlier transaction, instrument or event to which this section applies if, at the time of the later transaction, instrument or event—
(a) the earlier transaction, instrument or event was not registered, or(b) in the case of any application which has not been published, notice of the earlier transaction, instrument or event had not been given to the comptroller, and(c) in any case, the person claiming under the later transaction, instrument or event, did not know of the earlier transaction, instrument or event
(2) Subsection (1) above shall apply equally to the case where any person claims to have acquired any right in or under a patent or application for a patent, by virtue of a transaction, instrument or event to which this section applies, and that right is incompatible with any such right acquired by virtue of an earlier transaction, instrument or event to which this section applies
(3) This section applies to the following transactions, instruments and events:--
(a) the assignment or assignation of a patent or application for a patent, or a right in it;(b) the mortgage of a patent or application or the granting of security over it(c) the grant, assignment or assignation of a licence or sub-licence, or mortgage of a licence or sub-licence, under a patent or application;(d) the death of the proprietor or one of the proprietors of any such patent or application or any person having a right in or under a patent or application and the vesting by an assent of personal representatives of a patent, application or any such right; and(e) any order or directions of a court or other competent authority--(i) transferring a patent or application or any right in or under it to any person; or(ii) that an application should proceed in the name of any person and in either case the event by virtue of which the court or authority had power to make any such order or give any such directions.
68. Where by virtue of a transaction, instrument or event to which section 33 above applies a person becomes the proprietor or one of the proprietors or an exclusive licensee of a patent and the patent is subsequently infringed, the court or the comptroller shall not award him damages or order that he be given an account of the profits in respect of such a subsequent infringement occurring before the transaction, instrument or event is registered unless—
(a) the transaction, instrument or event is registered within the period of six months beginning with its date; or
(b) the court or the comptroller is satisfied that it was not practicable to register the transaction, instrument or event before the end of that period and that it was registered as soon as practicable thereafter
DECISION OF PUMFREY J
"In this case, there are three periods which are to be considered. Ninja was granted an exclusive licence on 1 July 1997, to 'manufacture, distribute and sell the Licensed Structure(s) in the Territory.' This agreement was registered on 9 December 1998. On 9 September 1999, Spring Form and Ninja entered into a second agreement which was not registered until July 2001. The recitals to the new agreement state that Spring Form and Ninja wish to amend the earlier licence agreement on the terms set out in the new agreement. The new agreement does not, in fact, operate by amendment of the earlier agreement but replaces it and it states its commencement date as having been 1 July 1997. It contains a Californian choice of law clause and a provision that it is deemed to have been executed in Orange County, California. No evidence was adduced of Californian law. The new agreement contains no reference to the earlier terms and contains an entire agreement clause (20.11). This is as follows:
This Agreement contains all the terms and conditions agreed upon [by] the parties hereto with reference to the subject matter hereof. No other agreements oral or otherwise shall be deemed to exist or to bind any of the parties hereto and all prior agreements, letters of intent, understandings and representations are merged herein and superseded by this agreement. Licensee represents that there are no contemporaneous Agreements or understanding between the parties [other than those] that are contained herein. This Agreement cannot be modified or changed except by written instruments signed by all the parties hereto.' (my emendations).
Mr Silverleaf QC submits that the disability imposed on Ninja by section 68 of the Act does not arise on the coming into force of the second licence, since by that document Ninja did not 'become ... an exclusive licensee' but merely remained one. It is far from clear to me in the light of this provision that it is open to Spring Form to allege even that there was a prior agreement, let alone that it conferred a licence on Ninja, but I prefer to base myself on what I think is the purpose of sections 68 and 33. These sections exist to coerce patentees and others entering into relevant transactions concerning the patent to register their interests. Where an agreement plainly replaces an existing agreement, which I conclude is the combined effect of the clause which I have set out and the commencement date of 1 July 1997, it is this agreement which is the agreement by which Ninja became Spring Form's exclusive licensee and this agreement which should be recorded on the Register. I conclude that Ninja were not disabled from claiming damages or an account of profits during the period from 9 December 1998 to 9 September 1999 but were not entitled to claim any other such relief save in respect of infringements after registration in July 2001".
THE NEW YORK LAW
"I have consulted Mr Douglas F Broder of Nixon Peabody in New York to advise on New York law in relation to the September 1999 agreement and in particular, the entire Agreement clause, clause 20.11. Mr Broder is an Attorney called to the New York Bar. He has advised me that clause 20.11 is what is called under New York law a "general merger clause" and that the point of such clause is to prevent the introduction of parole evidence, that is to say evidence outside the four corners of the Agreement that varies or contradicts the terms of the Agreement and to effect the intend of the parties that the Agreement is completely integrated.
Mr Broder also tells me that New York Courts will not ignore the terms of a previously executed Agreement for the purposes of determining the rights and obligations of the parties during the time before the earlier Agreement was superseded by a later Agreement containing a general merger clause.
Mr Broder's evidence is that a New York Court would find that notwithstanding the general merger clause in the September 1999 Licence, that Licence did not retroactively revoke any rights that the Claimant had that arose out of the 1997 Agreement, a validly executed independent Agreement. Thus the Claimant's rights under the July 1997 Licence would continue to govern until the execution of the September 1999 Licence when the earlier rights would have been superceded, but not retroactively replaced".
ARE THE DEFENDANTS' ARGUMENTS CORRECT?
When one takes that factual position to the consideration of section 68 in my view it still leads to the same conclusion as that of Pumfrey J but for different reasons.
That is my interpretation of section 68. It was not strictly necessary for me to determine it because all Mr Stewart QC had to show to defeat this Defence was that it was capable of being argued to a reasonable level of respectability that section 68 does not have the effect contended for by Mr Wyand QC. It is clear that the arguments put forward by Mr Stewart QC are at least arguable (although I have accepted them as being correct). That means the lack of registration has put the Claimants as being in a situation which the act of registration was designed to avoid i.e. an uncertainty as to its ability fully to enforce its exclusive licence. I do not believe if there had been any debate in 2000 as between the Defendants and the Claimants and the lawyers as to whether or not the 1999 licence agreement ought to be registered that any decision would have been made or urged other than register. The possibilities as shown by this action of non-registration would have been too awful to contemplate bearing in mind the relative ease of registration.
POSITION OF OTHER PARTIES