England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		16th January 2007

MR. JUSTICE LEWISON:

1. UK Patent 2 369 602 relates to an invention of a drive mechanism for printers. It was published in June 2002. Claims 1 to 7 claim a tape drive, that is to say a product, and claim 8 claims a method of controlling a tape drive. A dispute between the two parties, Zipher and Markem Systems, about entitlement to the patent has already been to the Court of Appeal and two attempts to take it further to the House of Lords have failed.
2. In the course of argument before the Court of Appeal counsel then appearing on behalf of Zipher contended that claims 1 to 4 of the patent as granted were invalid. So far as claim 4 was concerned, the assertion was dependent on a particular construction of the claim. The order made by the Court of Appeal contained the following recital:

"AND UPON RECORDING that in the course of argument Counsel for Zipher Limited accepted that claims 1 to 3 of United Kingdom Patent 2,369,602B and claim 4 thereof (if and in so far as the same on its true construction covers monitoring the length as well as the tension in the ribbon) are invalid in the light of the prior publication of United States Patent number 4909648."

3. As foreshadowed in the Court of Appeal, in February 2006 Zipher applied to the Patent Office to amend the patent. It proposed amendments both to the claims and to the specification. Claims 1 to 8 of the proposed amended claims claim a tape drive and claims 10 to 12 claim methods of controlling tape drives. Claim 1 has been rewritten as have claims 2 and 3. In the patent as originally granted, claims 2 and 3 were dependent on claim 1; in the proposed amended patent they appear to have independent validity.
4. In October 2006 Markem opposed the application to amend. Shortly thereafter Zipher issued proceedings claiming infringement of the patent. In summary the claims were: (1) Markem was making and selling tape drives which fell within claims 1 to 8 of the patent; (2) Markem had used a process falling within claims 10 to 12; and (3) Markem makes or imports printers which use a process falling with claims 10 to 12.
5. It is clear from the numbers of the claims referred to in the Particulars of Infringement that the claims in question are the claims as proposed to be amended not the claims in the patent as originally granted. That is made abundantly clear by paragraph 5 of the claim form which says in terms that references to the claims are references to the claims as proposed to be amended.
6. Mr. Arnold QC, who appears with Dr. Nicholson on behalf of Markem, says – and he should know – that this procedure is unique. He has encountered cases in which claims have been advanced where the patentee has accepted that some, but not all, of the claims as granted are invalid but he has never encountered and can find no trace in the books of any claim where the patentee, having accepted that all relevant claims in the patent as granted are invalid, relies on claims as proposed to be amended. Mr. Arnold submits that in those circumstances there can be no question of infringement.
7. Infringement is defined by section 60 of the Patents Act 1977. The definition in subsection (1) begins as follows:

"Subject to the provisions of this section, a person infringes a patent for an invention if, but only if, while the patent is in force, he does any of the following things in the United Kingdom in relation to the invention without the consent of the proprietor of the patent, that is to say –

(a) where the invention is a product, he makes, disposes of, offers to dispose of, uses or imports the product or keeps it whether for disposal or otherwise;

(b) where the invention is a process, he uses the process or he offers it for use in the United Kingdom when he knows, or it is obvious to a reasonable person in the circumstances, that its use there without the consent of the proprietor would be an infringement of the patent;

(c) where the invention is a process, he disposes of, offers to dispose of, uses or imports any product obtained directly by means of that process or keeps any such product whether for disposal or otherwise."

8. Section 60(1) speaks repeatedly of the "invention". In order to understand the meaning of that phrase it is necessary to refer to section 125 of the Act of which subsection (1) provides:

"For the purposes of this Act an invention for a patent for which an application has been made or for which a patent has been granted shall, unless the context otherwise requires, be taken to be that specified in a claim of the specification of the application or patent, as the case may be, as interpreted by the description and any drawings contained in that specification, and the extent of the protection conferred by a patent or application for a patent shall be determined accordingly."

9. Consequently, Mr. Arnold submits that in order to constitute infringement there must be something relating to a claim that being the scope of protection afforded by a patent. If, as in the present case, none of the granted claims are relied on as being themselves valid it must follow, he submits, that there is no possibility of infringement, hence no cause of action and the claim should be struck out. It is, however, clear that under section 75 of the Act the court may permit a claim to be amended. Section 75 (as itself amended by the Patents Act 2004) provides as follows:

"(1) In any proceedings before the court or the comptroller in which the validity of a patent may be put in issue the court or, as the case may be, the comptroller may, subject to section 76 below, allow the proprietor of the patent to amend the specification of the patent in such manner and subject to such terms as to advertising the proposed amendment and as to costs, expenses or otherwise, as the court or comptroller thinks fit."

10. Section 74(1)(a) makes it clear that the validity of a patent may be put in issue in proceedings for infringement.
11. The power to allow an amendment is, as section 75(1) says, itself subject to section 76. Section 76(3)(b) precludes an amendment being allowed if it extends the protection conferred by the patent. Section 75(3) provides:

"An amendment of a specification of a patent under this section shall have effect and be deemed always to have had effect from the grant of the patent."

Consequently, any amendment under that section will be retrospective.

12. Mr. Arnold points out that: (1) there is no allegation that any claim in the patent as granted has been infringed; (2) Zipher has conceded that the patent is at least partially invalid; (3) the validity of a patent is dependent on success in an application to amend; (4) that even if Zipher satisfies the preconditions necessary for an application to amend, the grant of permission to amend is a matter for the court's discretion. Consequently Zipher has no legal right at present, it has only the hope of acquiring one.
13. Mr. Arnold submits that a person who has no more than the hope of acquiring a legal right is in no position to bring an action. In that respect he relies on the decision of Sir George Jessel MR in Clowes v. Hilliard (1876) 4 ChD 413. That was an action for the administration of a will. The testator left a life interest in his personal estate to his daughter, Frances. Subject to that life interest, he left his personal estate to his daughters Isabella, Helen and Emily. That bequest was subject to a proviso that if they all died without issue then the personal estate would be held for his next of kin. The testator died on 4^th June 1869. All four of his daughters were then still alive. During the lifetime of the four daughters two of the testator's nephews and one of his nieces brought an action for administration of the estate, apparently contrary to the wishes of the four daughters. Sir George Jessel MR struck it out. At page 415 in his judgment he said this:

"The question is whether they may or may not be plaintiffs. Now, we are familiar with the doctrine that a person having an existing interest, however future or remote, may, so long as it is a present interest, institute a suit; but can a person having the mere expectation of a future interest institute a suit?"

14. That was the question he posed. He answered it beginning at page 416 as follows:

"How can the plaintiffs affirm that, on the failure of the daughters and their issue, if the event ever happens, they or any of them will be then alive? They may all then be dead. They have, in fact, neither a present interest nor anything beyond the expectation of a future interest. They have no interest at all, either vested or contingent; and it is a rule of this court that to enable them to sue they must have either the one or the other."

15. The Master of the Rolls went on to consider authorities and concluded at the end of his judgment as follows:

"The decision is clear that nothing less than an interest will allow a man to maintain a suit. Therefore, looking at it as an authority binding on me, it is a decision in favour of the demurring party and against the plaintiffs. Proceeding, then, upon the sound principle that a person who may not be a member of a class which is to be ascertained, and which is to take upon the happening of a future contingent event, is not a person who can maintain an action, I am of opinion that the plaintiffs have no right to institute this action, and the demurrer must therefore be allowed."

16. It is true in the present case that there is no allegation that the patent as granted has been infringed. But by reason of section 76 if the patent is amended the scope of the claims cannot be greater than those of the patent as granted. Anything that infringes the patent as amended must necessarily infringe the patent as granted. In addition, on the 30^th November 2006 Zipher put forward amended particulars of infringement which identified which claims in the patent as granted it alleged were infringed.
17. Mr. Speck takes the point that the assertion of a cause of action is itself a cause of action and that it may be overcome by a defence of invalidity. I do not, however, think that this is the correct characterisation of a cause of action. The classic definition of a cause of action is that of Diplock LJ in Letang v. Cooper [1965] 1 QB 232 namely, that a cause of action is a factual situation, the existence of which entitles one person to obtain from the court a remedy against another person. If the patent is and remains invalid no cause of action arises even though it may not be possible to know that until the invalidity has been determined.
18. It is true also that Zipher has conceded that the patent is partially invalid. But the important word, I think, is "partially". If it is partially invalid, it is also partially valid so Zipher is, in my judgment, asserting a legal right. Section 63 of the Patents Act 1977 recognises that relief may be given where a patent is partially valid. The practice of revoking a partially invalid patent is, in my view, just that; a practice. Nothing compels its revocation.
19. It is also true that the grant of permission to amend is dependent on a discretionary decision by the court but, if granted, the amendment will be retrospective. It cannot, therefore, be said at the moment that Zipher will not in retrospect be seen to have had a cause of action at the date of issue of the claim form. It is unlike the Clowes case where even if the life tenant and the remaindermen had all died, the next of kin would not have had retrospective entitlement. The principles upon which the court exercises its discretion to amend are summarised in guidelines formulated by Aldous J in Smith, Kline and French Laboratories Limited v. Evans Medical Limited [1989] FSR 561 at 569. They are quoted in Terrell on the Law of Patents, 16^th edition at paragraph 9-32. The relevant principle for present purposes is the fourth principle, namely, that:

"…. a patentee who seeks to obtain an unfair advantage from a patent which he knows or should have known should be amended, will not be allowed to amend. Such a case is where a patentee threatens an infringer with his unamended patent after he knows or should have known of the need to amend."

20. That does not, in my judgment, amount to any form of rigid rule. Moreover, what the learned judge plainly has in mind is a case where an actual threat has been made in reliance upon the unamended claims. I do not consider that that principle would prevent the formulation of a pleading by reference to the unamended claims identifying where the alleged infringement falls within the scope of the claims as unamended while at the same time indicating that it is only the claims as proposed to be amended that would be relied upon. Something, broadly speaking, along those lines was the position of Mr. Arnold's erstwhile clients in Petrolite Holdings v. Dyno Oil Field Chemicals UK Limited [1998] FSR 190 but there is this difference between that case and this: that in the Petrolite case it appears from the recitation of the facts by Laddie J that Petrolite had been drawing attention to the unamended patent to customers of the trade rival without any indication that the claims embodied in that patent were not contended to be valid. That is the sort of unfair advantage which, in my judgment, Aldous J had in mind.
21. In addition, it seems to me that as Mr. Speck points out, rule 63.10 of the Civil Procedure Rules expressly envisages the possibility that an application to amend will be made in a case in which the applicant for amendment does not contend that the claims prior to amendment are valid. Rule 63.10(2) requires that an application notice must, amongst other things, "state whether the applicant will contend that the claims prior to amendment are valid". The use of the word "whether" plainly envisages that there may be cases in which the applicant accepts that they are not valid before amendment. This seems to me to coincide with the observations of Jacob LJ in Nikken Kosakusho Works v. Pioneer Trading Company [2006] FSR 4. In that case Jacob LJ said at paragraph 9 of the judgment:

"Clearly, if the amendment is proposed in sufficient time before trial the defendant has a full opportunity to attack the proposed amended claims, not only on their allowability or in the exercise of discretion, but on their ultimate validity. The existing procedure for an application to amend the patent specification is governed by CPR Part 63.10. The procedure is by way of an application notice, service on the Comptroller, subsequent advertisement and so on. The procedures can, in appropriate circumstances, be gone through quickly or gone through provisionally on the basis that probably no third party will ever come in to oppose. It may be noted that the rules specifically require by Part 63.10 that the patentee must state whether he will contend that the claims prior to amendment are valid. That means that in advance of trial everyone knows where they stand. The patentee is either saying that the original claims are all right or not, and he is plainly also saying that the proposed amendment claims are all right."

Again, the last sentence from the quoted passage in my judgment envisages that there may be cases in which the applicant for amendment is saying that the original claims are not all right.

22. This also seems to be to be consistent with the procedure adopted before Laddie J in the Petrolite case. In the Petrolite case Laddie J decided at page 194 that the patent as pleaded was indeed invalid. Nevertheless, although Laddie J ordered revocation, he did so on a conditional basis: he allowed Petrolite the opportunity to apply to amend. If it is impossible to apply to amend an invalid patent, as Mr. Arnold suggests, then plainly the procedure adopted by Laddie J would have been inappropriate.
23. I do not, of course, suggest that relief will actually be granted before the amendment is allowed, if indeed it is allowed. But that is not the question. The question is whether Zipher are allowed to come before the court at all. In my judgment they are. This is a case in which, in accordance with the modern procedural approach, all cards should be placed on the table as again Jacob LJ said in the Nikken case at paragraph 25:

"In the real world, patentees, faced with a real problem about their construction of their claims, ought to face up to them early and decide whether they need an amendment or might need an amendment. That is one of the purposes of the rule, to make people face up to their cases at an early stage, not at a late stage."

24. It would be a discouragement to the making of timely admissions and to the narrowing of issues if the mere fact that a patentee recognised the need to amend before he began his action compelled him to adopt a dual stage procedure by going through the Patent Office first before he could even approach the court. That would simply encourage specious applications and the refusal to make admissions. If the current action is struck out Zipher will have to pursue its application to amend in the Patent Office with all the delay and additional cost that that entails and only then will it be able to bring proceedings. The thrust of modern procedural codes is to encourage the saving of costs and to facilitate as many applications as possible being heard together.
25. In all those circumstances, it seems to me that this is not a case in which I should strike out the claim. I therefore refuse the application.

MR. ARNOLD: My Lord, in the interests of accuracy when you are revising the transcript could you note that what I said was unique about the present case was the reliance purely on the claims as proposed to be amended. That was what I said was unique and unprecedented.

MR. JUSTICE LEWISON: Did I not say that?

MR. ARNOLD: No.

MR. JUSTICE LEWISON: If I did not say that, I meant to say that.

MR. ARNOLD: You did not say that.

MR. JUSTICE LEWISON: What did I say?

MR. ARNOLD: You said it was unique in that it was reliant purely upon … no claims were … I am trying to read my writing which is why I am a bit hesitant. It was something like all claims accepted to be invalid which, of course, is not the present case.

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: It has never been the case that Zipher has accepted that all granted claims are invalid; I never suggested that they did.

MR. JUSTICE LEWISON: Thank you very much for that correction.

MR. ARNOLD: So the unique point was the reliance purely upon claims as proposed to be amended ----

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: ---- rather than as in the Petrolite case, relying both on granted claims and claims as proposed to be amended once we had made the amendment application.

My Lord, while I am on my feet, I will apply for permission to appeal ----

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: ---- because this does raise a point of principle,

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: Not only that ----

MR. JUSTICE LEWISON: I will hear what Mr. Speck has to say.

MR. ARNOLD: Could I just make one point which he might not have anticipated, which is this. If my Lord's judgment stands, in my submission it is going to lead to a free-for-all. Patentees whose patents are subject to defects (to put it neutrally) will hereafter be able to say, "Forget about the granted claims, let's start with a clean slate. We would like to amend our claims as follows. Nobody need even look at the granted claims, that is all academic now, we'll just go for these claims as proposed to be amended." In my submission that is not a desirable route to take.

MR. SPECK: My Lord, I have two applications. I have an application for costs ----

MR. JUSTICE LEWISON: Yes.

MR. SPECK: ---- for summary assessment. In answer to my friend's application for permission to appeal, it is an issue which, in my submission, is relatively straightforward particularly when one looks at rule 63.10. It is absolutely plain that the author of those rules anticipated that somebody would be able to apply to amend a patent where claims they were seeking to amend they accepted were invalid. It is a straightforward application of what I always understood the practice to be even if Mr. Arnold had never experienced it.

This is not a case where there is any reasonable prospect of success and, more particularly, it is a case where the Court of Appeal themselves should look to see whether they think there really is any point in hearing half a day or a day's argument on it.

So it is a matter that your Lordship should decline to give permission on and my friend can renew his application to the Court of Appeal if he thinks there is any prospect of succeeding in relation to it.

May I move to costs?

MR. JUSTICE LEWISON: Yes.

MR. SPECK: On the question of costs we have provided a schedule. I obviously ask for my costs in any event having succeeded. A schedule has been provided hopefully to your Lordship and the other side have certainly had it.

MR. JUSTICE LEWISON: Yes, I have it.

MR. SPECK: Unfortunately, your Lordship does not have one from the other side.

MR. JUSTICE LEWISON: No.

MR. SPECK: It is, we suggest, a really quite modest amount to deal with an application of this nature. It is something which, I think your Lordship, looking at the numbers in court on the other side and their seniority, can pretty fairly take the view that we will have spent less than they have. Obviously it is a matter for your Lordship in the end but we say that that is a very reasonable amount of money to be claiming for this application, particularly in the nature of the seriousness of it and the consequence to my clients if they had lost.

So we invite your Lordship to look at that and assess it at around the figure that we ask for which is £11,352.50. There is not really much else I can say about that. As I say, it is a matter for your Lordship.

MR. JUSTICE LEWISON: Yes. Just on a point of information, Mr. Speck, I assume from the way that this is presented that it excludes VAT?

MR. SPECK: Yes, it does, because we ----

MR. JUSTICE LEWISON: You reclaim it?

MR. SPECK: My Lord, yes. So those are my submissions on both those two points.

MR. JUSTICE LEWISON: Thank you.

MR. ARNOLD: My Lord, I have got nothing to add on permission to appeal.

MR. JUSTICE LEWISON: Right. And costs?

MR. ARNOLD: So far as costs are concerned, I cannot resist the principle of costs.

MR. JUSTICE LEWISON: No.

MR. ARNOLD: I do not resist a summary assessment either. So far as the amount is concerned, may I hand up the latest guidance figures. (Document distributed) You will see that the rates claimed for the solicitors are £315 per hour, £200 and £110. They are not classified as they should be into A, B, C or D. Obviously Mr. Gold is A and the trainee must be D. Whether Ms. Schluckebier (I am sorry, I am mispronouncing her name; I apologise to her) is B or C is not stated. But in any event, if you look at the guideline rates on page 2 of the hand-out, my learned friend's solicitors are based in Leeds (Inner) and therefore the applicable rates under the guidelines are £195 for Grade A and either £173 or £145 if it is B or C and then £106 for Grade D. So the rates, particularly for Mr. Gold, are well above the guideline rates. That is point one.

Point two, if you look at page 1 of the guidance, a point is made at the foot of the page under the heading "Rates to allow for senior fee earners" that pre-trial hearings do not generally justify the attendance of a senior fee earner, such as a partner, but generally the right course is to send a junior fee earner. What they did in the present case was to have the partner come along from Leeds.

My third point is that if you look at the last page you will see counsels' fees.

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: The table for counsels' fees suggests the appropriate fee for a half-day hearing for a junior of 10 plus years' call is £1,397. You will see in the present case that total counsels' fees claimed are over £8,000 including £1,600 on behalf of Mr. Ward who is not even actually here. Given that Mr. Speck is charging for preparatory work as well as for the brief fee, it is not totally clear to me what Mr. Ward has actually done in the event.

So my Lord, summarising those points, in my submission both the solicitors' costs and counsels' costs need to be fairly substantially reduced. The fact that we may have had equivalent or even more senior representation and may have spent more money is neither here nor there; it is simply an irrelevant consideration as the guidelines make very clear. The question is what is reasonable for the receiving party to do? The fact that someone chooses to have Rolls-Royce representation does not mean to say that they are entitled to recover it from the other side.

In my submission both of those elements of the bill need to be substantially reduced. In my submission the correct figure, applying the guideline rates, would be a maximum of £5,000.

MR. JUSTICE LEWISON: Yes.

MR. SPECK: There will come a point when we will spend more arguing about it than dealing with it, but if could just answer some of the points that my friend makes?

MR. JUSTICE LEWISON: Yes.

MR. SPECK: First of all, there is Mr. Ward. Mr. Ward has helped me considerably in the preparation of the case and the skeleton, in particular finding the authorities and so on. It was not felt necessary for him to be here and we have prepared in an efficient way. These are guidelines. It does not deal with the usual costs for patent matters which are usually a little bit more expensive than ordinary Chancery Division matters.

There is also the point that my friend makes about Mr. Gold. Mr. Gold actually is a partner at Eversheds. They have offices all round the country. He does work from all of them. Mr. Arnold suggests that he is from Leeds. He actually does more from Manchester. That is still in £195 as well but he does some from London. So to try and get Mr. Gold shoehorned into one of these guideline tables is just not an accurate thing to do. I suggest that the rate that he is charging is more than reasonable. Although these are guidelines, the ultimate test for your Lordship is what is reasonable to be recovered, what was reasonably incurred? So it is not relevant as to how difficult and how important this hearing is in assessing all of those matters to look to see who is sitting on the other side of the court.

MR. JUSTICE LEWISON:

26. In principle it is plain that the defendant must pay the claimant's costs. That is accepted by Mr. Arnold. It is also accepted that I should summarily assess the costs. The costs as detailed in the statement of costs amount to £3,327.50 for solicitors' costs and £8,025 for counsels' fees.
27. It is true that the rates charged for the solicitors' fee earners (both Mr. Gold, the partner, and Ms. Schluckobier, the solicitor) exceed the guideline figures for summary assessment published in January 2007. I must, however, bear in mind that this is patent litigation which is a very specialised form of litigation and also is plainly litigation between two very substantial corporations.
28. So far as counsels' fees are concerned, the fees by the general standards of fees that I see in this sort of application are not by any means out of the ordinary. I am not quite sure where the figures in the table of counsels' fees come from but they are very substantially below what I ordinarily see in schedules of costs of these kind. Having said that, I do accept to some extent Mr. Arnold's point that if a client wishes to have Rolls-Royce treatment it is not necessarily the case that the other side will have to pay for it if unsuccessful.
29. I propose, therefore, to make a small reduction, but a relatively small one, in the fees as claimed which I will assess at £9,000.
30. So far as permission to appeal is concerned, this does, as it seems to me, raise a question of principle which is worthy of consideration by the Court of Appeal. The case is by no means a straightforward one and there are undoubtedly formidable points that Mr. Arnold makes in support of his submissions.
31. Consequently, I will grant permission to appeal.

MR. SPECK: My Lord, there are the directions which are in tab A3.

MR. JUSTICE LEWISON: How controversial are these?

MR. SPECK: My Lord, I would have hoped not very.

MR. ARNOLD: My Lord, there are two issues: first, whether to make directions at all; and, secondly, what then the directions should be. So far as whether there should be directions at all, as I pointed out in my skeleton argument, the period for opponents to oppose has not yet expired. We therefore ----

MR. JUSTICE LEWISON: But it has all been advertised in the Patent Office and you are the only opponent.

MR. ARNOLD: Slightly different amendments. Moreover, it is by no means unprecedented for people to miss it first time round and spot it second time round; I have had experience of that. So it is not impossible. It may be somewhat unlikely that an opponent is going to come in at this stage but it is by no means impossible.

Moreover, the other matter is that it makes sense to make directions in the amendment application that track directions on the main action. So far as the main action is concerned, my learned friend has no application notice seeking directions on that. It is fair to say that directions have been proposed and they are in the bundle. In my submission it is premature to make directions given that we have not yet served our defence and counterclaim, therefore nobody knows what the issues are. Nor have we put in our statement of opposition on the amendment application. So again, on the amendment application we do not know what the issues are.

In my submission it makes a great deal more sense for the application for directions on amendment to be adjourned by a modest period – I am not suggesting we need to go away for a long period of time – sufficiently to allow any third party opponents to come in and also for it to come back after we have served the defence and counterclaim and our statement of opposition to the amendment. Then we will all be able to see what the issues are and, therefore, what directions are required. Otherwise, to some extent, one is making directions in the dark.

MR. SPECK: We can see what it is all about now: this is delay, delay, delay. Both draft directions are in tab 3.

MR. JUSTICE LEWISON: Yes.

MR. SPECK: Herbert Smith, Markem's solicitors, have known that we are going to propose directions or ask your Lordship to make directions on both parts of the case. They have even written back dealing with the time for the defence. I can show your Lordship that at tab 10 page 109. What they say is, "We would like another six weeks, please".

Mr. Arnold says we do not know what the issues are on the amendment because he has not put his statement in yet. Other than some extremely minor tweaks (because the Patent Office asked us to clarify stuff) the amendments are the same as the ones that were advertised before and they have them clearly. Part of Mr. Arnold's submission earlier was "Everybody knows what all the issues are in this case; it has been going on for ages".

MR. ARNOLD: No.

MR. SPECK: We do know what we are going to be fighting about in this action. We certainly know what we are going to be fighting about on the amendment. He has put a detailed objection in and it is going to be exactly the same. All Mr. Arnold is trying to do is to take the maximum amount of time in all of this.

We invite your Lordship: (1) to actually grasp the nettle today and make the directions in both the application and the action; (2) we invite your Lordship not to give them six weeks as they have asked for. Just so that your Lordship understands, in a patent action you have 42 days where you can challenge validity. The point of that is that some litigants have not had the opportunity of doing any search for prior art and so forth. This is not that case at all. The action has been going for quite some time now anyway but even before then they would have been looking at validity of the claims for the question of the amendment.

So this is a case where they have everything they need. They should be given no more than two weeks to do their defence; that is generous. Your Lordship ----

MR. JUSTICE LEWISON: Two weeks? Your draft says 28 days.

MR. SPECK: We have been even more generous to them then. We cannot go back on that if that is what we have said. That was probably envisaged from the time we provided it to them, but there it is. That is extremely generous for a party that has known about all the issues in the case, the prior art and the fact that they are a defendant in this action since November.

On the directions for the amendment, my Lord, the passage you read out from Jacob J in the Nikken case that I have foreshadowed ----

MR. JUSTICE LEWISON: Yes.

MR. SPECK: ---- does give a flavour of the approach that you can take. This is actually a case where it may have been appropriate for the court to order dispensing with advertisement of the application second time round. Sometimes that is done even when it is the first time round if the court thinks that there really is everybody who is interested before it. They have advertised but there is absolutely no need, in my submission, to build in an added delay to the timetable where it is pretty clear that there is going to be nobody else coming in. If the absolute unexpected happens, whoever that additional opponent is ----

MR. JUSTICE LEWISON: Can you just give me some help on the timetable, Mr. Speck? The advertisement was?

MR. SPECK: The second one or the first one?

MR. JUSTICE LEWISON: Yes, the second one.

MR. SPECK: The second one, I think, was 10^th January. It was only very recent.

MR. JUSTICE LEWISON: Right. What is the period that you have to wait?

MR. ARNOLD: Fourteen days.

MR. JUSTICE LEWISON: Fourteen days I hear. So that has expired.

MR. SPECK: No. It is only the 16^th ----

MR. JUSTICE LEWISON: 10^th January, I am sorry. But your direction envisages your evidence going in towards the end of April.

MR. SPECK: Yes.

MR. JUSTICE LEWISON: Why do you need that long? What is the magic in that?

MR. SPECK: There is no great magic in that at all. We thought we would propose something which was not causing both parties to do things at break-neck speed.

MR. JUSTICE LEWISON: So it is three months after this advertisement period expires?

MR. SPECK: Yes. So it is already built in there if somebody … The point I am making to your Lordship is if somebody does come out of the woodwork, there is no reason to suppose that on my proposed directions we cannot actually come back and deal with it.

MR. JUSTICE LEWISON: I see.

MR. SPECK: What my friend is trying to do is to kick everything off into the long grass and not get down to having some directions at all. So we invite your Lordship to actually make those directions in the amendment application and the action.

MR. JUSTICE LEWISON: Yes.

MR. SPECK: Let us get on, have a timetable so we know where we are going and hopefully put it front of the Listing Officer so that we can have a trial date as well. There is absolutely no reason not to get on with it.

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: My Lord, just still on the principle of whether to make directions today, it is very easy to throw around accusations of delay, but let us be realistic. These parties have been locked horns under this patent for over four years now so there cannot be any suggestion that there is a particular rush. Moreover, the one thing my learned friend has not condescended to tell you is when the likely trial date might be. I do not even know if they have made enquiries of Chancery Listing to see when a patent trial might be accommodated. But our information is that the earliest likely date for a trial of what we consider to be the right estimate is around April 2008. So there is no tearing rush in terms of getting on with matters. Experience shows that if one tries to rush unnecessarily it just causes difficulties further down the line.

It is not our fault that despite the fact that they sent us the draft application notice seeking the amendments on the 31^st October (that is before they had even issued the claim form) they did not actually issue the application until the 12^th December. So they themselves let six weeks go by without even issuing the application form. When they did issue it, as I have pointed out already, it was defective. It does not comply with the very rule that my learned friend relies as the Sheet A for all his argument on the strike out application. So they are going to have to amend the application notice and/or the reasons to cure that defect at some point in any event. Because of their delay in issuing the application notice, we have come to a situation where the advertisement has only taken place on 10^th January and the period for opposition of 14 days has not yet expired.

Now in all of those circumstances it seems to us to make a great deal more sense to actually be practical about it, come back for directions both on amendment and on the main action when we have the period for opposition expired (and therefore we know who the parties are); we have our statement of objections to the amendment in (my learned friend says we have already done it in the Patent Office. I can tell my Lord that neither I nor my learned junior had any input into that document so it may well look rather different by the time we have had some input into it); and we have served our defence and counterclaim so again we know what the issues in the main action are. That is the ordinary way of doing things. It is the claimants who are trying ----

MR. JUSTICE LEWISON: What is the time for your defence?

MR. ARNOLD: On my learned friend's proposal that is 28 days from today.

MR. JUSTICE LEWISON: If no order is made, what is it?

MR. ARNOLD: The way the rules work currently, we were not obliged to put in any defence pending the strike out application because the rule says that you cannot get judgment in default until the strike out application is determined.

My strike out application having been unsuccessful, I now need an extension of time, technically, for time to put in my defence. But, obviously, it cannot be done straightaway. There was no point incurring the costs of preparing the defence in advance of the strike out application being determined because they might have been wasted; hence the rule.

So strictly speaking we need an extension. There is a question of how long. My learned friend accepts it should be at least 28 days. We are only asking for 42, which is not that great a difference. But at all events we are going to be back. Even if my Lord gave us the full 42 that we are asking for, we are going to be back in no later than two months' time. In those circumstances ----

MR. JUSTICE LEWISON: What is 42 days?

MR. ARNOLD: 28^th February. So if we come back early in March, at that point we will know whether there are opponents, we will know what the grounds of objections to the amendments are and therefore what directions are appropriate on amendment and we will know what the issues in the main action are, so we will know what directions are appropriate. Given that the trial date is unlikely to be until April, then it is not going to make much difference.

I can see that there is one potential concern in that scenario which is the trial date slips. That can be dealt with by giving the parties permission to fix now. We do not have to have other directions to fix the trial date. So we could go off and fix now and get such date as is available, which, as I say, on our information is likely to be in April. So there will not be the extra delay as a result of what we are suggesting.

Since, as a matter of practical reality ----

MR. JUSTICE LEWISON: Wait a minute ----

MR. ARNOLD: ---- one tends to make directions ----

MR. JUSTICE LEWISON: ---- if I give you permission to fix a trial date, you will have to go off to the Listing Office and they will ask you, "How long is this trial going to be?" You will say, "It is going to be four days" or whatever it is.

MR. ARNOLD: My learned friend's estimate, apparently, is four days. We think that we ought to err on the side of caution and allow somewhat longer than that.

MR. JUSTICE LEWISON: Right, six days then.

MR. ARNOLD: We can give a ballpark at this stage of five to seven. It is going to be within that range.

MR. JUSTICE LEWISON: Yes. And for you to be able to say that to Listing presupposes, does it not, that you have an idea of what volume of documents are going to be involved, whether there are going to be expert witnesses, whether there are going to be live witnesses and so on.

MR. ARNOLD: We know there are going to be ----

MR. JUSTICE LEWISON: Wait a minute. So if you know all that, why should not I make directions about it all?

MR. ARNOLD: Well ----

MR. JUSTICE LEWISON: On the one hand you say "We do not know what this case is about until the pleadings are closed" and on the other hand you say, "We want to go and fix a trial date".

MR. ARNOLD: My Lord, with respect, I have not said we do not know what it is about. Obviously having litigated for four years we have some idea ----

MR. JUSTICE LEWISON: Yes, of course.

MR. ARNOLD: ---- but, what we do not know is with precision what the issues are for which directions are needed. That is why my estimate of the time is as vague as five to seven days. I could say it is that ballpark but I cannot be more precise. Once we have nailed down the issues one can be more precise. One of the things we do not know at the moment, for example, is whether we need experiments. One of the things that we may well be alleging, for example, is insufficiency; that is one of the things we are turning our minds to. If there is going to be insufficiency both sides may well need to do experiments and that has to be built into the timetable whereas if there is no allegation of insufficiency then experiments may well not be necessary.

MR. JUSTICE LEWISON: Will you not know that by the end of April?

MR. ARNOLD: To be sure ----

MR. JUSTICE LEWISON: That is all the directions suggest, is it not? That if you want to conduct an experiment you say so by the end of April.

MR. ARNOLD: It is providing for notices of experiments to be served by then but we do not even know at this stage whether we need notices of experiments. It is pointless making directions for things that may be totally unnecessary. Nor do we know at this stage how many experts. Is this a one expert case or a two expert case? Presently I could not answer that question. It has got to be at least one because the primary expert evidence in a patent action, as my Lord knows, is the expert evidence. But whether this is a one expert case or a two expert case I am not sure about.

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: And how my learned friend can know when he has not seen my defence and counterclaim, I really do not know. So all we are trying to do is be practical. It is easy to say, "Oh we are just delaying" and "Why does it make any difference"? But in my submission when one knows what the issues are, one can be better informed and can make a more sensible judgment as to what are the appropriate directions.

MR. JUSTICE LEWISON:

32. So far as the application to amend is concerned I think that there should be directions given and I will make the directions in the terms of the draft.

MR. ARNOLD: I have not addressed my Lord on the actual timetable, I have only addressed you on the principle so far. So far as that is concerned, I have pointed out in my skeleton argument the draft suffers from two defects. First of all, it does not make any provision for us to plead, even though it is required by the rules. So an elementary first requirement is for us to plead to the statement of reasons so the parties know what the evidence is to be directed to. Our suggestion for us to serve grounds of opposition would be the same period we are asking for for our defence and counterclaim, that is to say, 28^th February.

MR. JUSTICE LEWISON: Right.

MR. ARNOLD: Since my learned friend is not proposing ----

MR. JUSTICE LEWISON: His evidence comes two months later.

MR. ARNOLD: ---- evidence till April, then there cannot be any real objection to that, I would suggest.

The second defect is that the draft directions seem to have been taken from a very, very old precedent. Way back when it was often ordered for documents to be disclosed with each parties' evidence. But we now know that that is wholly unsatisfactory. What you want is disclosure first followed by evidence in the normal way.

So we will be proposing that, as I say, our grounds of opposition to the amendment should be filed on the 28^th February, there should be disclosure, mutual disclosure by list on 28^th April and given that there is unlikely to be a trial before April 2008 we would suggest that the evidence-in-chief from Zipher should be round about November and our evidence in reply round about February. Let us assume we will get on on 1^st April so let us say 1^st November 2007 for the evidence-in-chief and 1^st February 2008 for the evidence in reply.

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: Those dates have the convenience that come the point that we get to directions on the main action, that that should slot in on the basis again of a trial date in April 2008.

MR. SPECK: The first point is a trial in April. Sometimes when you go to the Listing Office they do say you cannot have a trial until a particular time because you are just unlucky and there are lots of people before you. The list is a moving target. A big patent action came out of the list for this week. Things go in and out all the time.

What is wrong, as a matter of principle, with the approach that my friend is trying to suggest to your Lordship is "Please accept we cannot have a trial till then and put everything at the back end of that period." But things can be done and we can have directions which would enable a trial date ----

MR. JUSTICE LEWISON: Let us work forwards. Let us start with his grounds of opposition.

MR. SPECK: Indeed. My first point is that is the way it should be dealt with. Grounds of opposition: if he really does want to revisit it because it is now Mr. Arnold instead of Mr. Watson, I think it was ----

MR. ARNOLD: It was patent agents.

MR. SPECK: ---- instead of patent agents, then if he wants to replead I cannot object to it. But he should not have until the end of February to basically make the same points that have already been dealt with. He has had the same application ----

MR. JUSTICE LEWISON: That does not matter, does it, because you are not giving him your evidence till April?

MR. SPECK: I will tell your Lordship why it might matter. We need a significant period of time in which to address in detail the objections. We need to have them set.

MR. JUSTICE LEWISON: You have got two months.

MR. SPECK: He said he wanted disclosure first. Again, I am going to say to my Lord, if he really wants to adopt that practice, I do not mind. But what I do not want is, in effect, all the time being taken up for Mr. Arnold to copy out his patents agent's draft with a few tweaks, everybody to have to do disclosure in two weeks or three weeks and then me to have to do my evidence after disclosure in another two or three weeks after that. That is not a fair way of dealing with this when they actually know what the issues are and should be able to answer them.

MR. JUSTICE LEWISON: That cuts both ways. For the purposes of doing disclosure you know what the issues are as well. You look at their last opposition and see what they said.

MR. SPECK: Yes.

MR. JUSTICE LEWISON: You think it is going to be the same with a few tweaks so you can be getting on with disclosure.

MR. SPECK: I certainly can be getting on with it. What I do not understand, in my submission, my Lord, is why, having had the issues of this application for so long, having dealt with it once and then having put off having to deal with it again by making this application, my friend can then still turn round and say to your Lordship, "I need six weeks to deal with it". He clearly does not.

What we would suggest to my Lord is that you give them a realistic time (like two or three weeks) in order to do that, after that put in some disclosure before evidence, if he wants to do it that way – I have no firm view either way on that – and you catch up with the directions that we have proposed with evidence towards the end of April after that; not that he somehow uses most of that period to sit and do nothing and then have to deal with everything that arises on whatever his document comes in in very short period.

So that is the approach that we suggest your Lordship could take.

MR. ARNOLD: My Lord, if I could just say one word more. The advantage of what we are proposing is that hopefully it will avoid the need for extensions of time. It is all very well setting an aggressive timetable but what tends to happen in that event is that subsequently everybody asks for extensions. Whereas, if one adopts a more realistic timetable at the outset, then that, hopefully, will not be necessary. While it may be the case that we could do grounds of opposition quicker than 42 days, if we have 42 days then there is no doubt we will be able to meet that deadline, we will not need an extension and it will not actually have any impact on the trial date because that only takes us to the end of February. That still leaves plenty of time before any conceivable trial date for disclosure and/or evidence-in-chief and in reply.

MR. JUSTICE LEWISON:

33. I am going to set a timetable. There will be permission to the defendants to file grounds of opposition by 14^th February 2007; mutual disclosure, standard disclosure by list by 21^st March 2007; the claimant's evidence-in-chief by 27^th April 2007; and the defendant's evidence in opposition by 8^th June 2007.

MR. ARNOLD: That is even earlier than my learned friend was suggesting. He was suggesting 6^th July. I would ask for the time he suggested.

MR. JUSTICE LEWISON: That was his reply.

MR. ARNOLD: I am sorry, I am misreading it. I do apologise.

MR. SPECK: Your Lordship, I do not think there is any issue with paragraphs 5 to the end.

MR. ARNOLD: No, evidence in reply is us. I was right first time.

MR. JUSTICE LEWISON: Evidence in reply is Zipher.

MR. ARNOLD: No, no, I am sorry, I am desperately confused here. I keep on looking at the wrong paragraph.

MR. JUSTICE LEWISON: Your evidence is 8^th June.

MR. ARNOLD: Yes.

MR. JUSTICE LEWISON: His evidence in reply 6^th July.

MR. ARNOLD: Yes.

MR. JUSTICE LEWISON: In principle, so far as the main action is concerned, I am prepared to give directions up to and including disclosure and inspection.

MR. SPECK: And including the ability to go the Listing Officer and ask for ----

MR. JUSTICE LEWISON: And including the ability to go to the Listing Officer. But I think there is force in Mr. Arnold's point that experiments and experts ought to wait.

MR. SPECK: I will not trouble you with arguments as to how … it is all standard anyway.

MR. JUSTICE LEWISON: Yes.

MR. SPECK: If your Lordship gives us the ability to go and get a trial date, I am sure that is sufficient.

MR. JUSTICE LEWISON: Yes. Are you able to agree between you at least a bracket for the time estimate?

MR. ARNOLD: As I say, my estimate is in the ballpark of five to seven.

MR. SPECK: I cannot say he is way off base.

MR. JUSTICE LEWISON: And that would include both the main action and the amendment application?

MR. SPECK: Yes, it will.

MR. JUSTICE LEWISON: In that case I will give you permission to apply to fix a date for both to be heard together.

MR. ARNOLD: Did I understand my Lord to be indicating that he will make the same timetable in relation to the main action, that is to say, defence and counterclaim 14^th February ----

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: ---- and disclosure 21^st March?

MR. JUSTICE LEWISON: Yes. Shall I say CMC to be arranged?

MR. ARNOLD: Yes.

MR. JUSTICE LEWISON: Or you will just come back and do that, will you?

MR. ARNOLD: I think CMC to be arranged would be sensible.

MR. JUSTICE LEWISON: When should that be, April/May, that sort of time?

MR. ARNOLD: Yes.

MR. JUSTICE LEWISON: Mr. Speck?

MR. SPECK: I would have thought it should be April given that they would have had disclosure two weeks ----

MR. JUSTICE LEWISON: I cannot now remember when the Trinity term begins. When does term begin?

MR. ARNOLD: The Easter break is round about the beginning of April. By the time we have had inspection ----

MR. SPECK: I think 1^st April ----

MR. ARNOLD: ---- that will take us to the end of term approximately. So realistically we are going to be coming back in the second half of April.

MR. JUSTICE LEWISON: In the Easter term?

MR. SPECK: Inspection will not take us till the end of term but I think the beginning of April is the Easter holiday, so it is either going to be the last few days in March or the end of April.

MR. JUSTICE LEWISON: So the CMC to be fixed as early as possible in the Easter term.

MR. ARNOLD: That would seem to be sensible, my Lord.

MR. SPECK: We would prefer the end of March but it is a matter for your Lordship.

MR. JUSTICE LEWISON: I think we will say as close as possible to the beginning of the Easter term.

MR. ARNOLD: My Lord, I am obliged. That leaves two matters outstanding. First of all, as I have mentioned a couple of times already, the claimant needs to amend either its application notice or its reasons – I do not mind which – to include a statement about validity because at present they are in breach of the rules.

MR. JUSTICE LEWISON: Yes.

MR. ARNOLD: I assume there is no dispute about that.

MR. SPECK: We will do that.

MR. ARNOLD: Secondly, there is the question of the section 27 application.

MR. JUSTICE LEWISON: I am told it has been stayed.

MR. ARNOLD: Stayed pending the present hearing.

MR. JUSTICE LEWISON: Oh I see.

MR. ARNOLD: But you see, the effect of my Lord's decision, if it stands, is the Comptroller now has no jurisdiction by statute and therefore those proceedings need to be dismissed. My Lord has no power to dismiss them – that is a matter for the Comptroller – but it would make sense if we can agree here and now that they will be discontinued.

MR. JUSTICE LEWISON: That depends on whether you appeal or not.

MR. ARNOLD: I am sorry?

MR. JUSTICE LEWISON: That may depend on whether you appeal or not.

MR. ARNOLD: Well indeed, my Lord, yes. But on the assumption that we either do not appeal or the appeal is dismissed, I would feel it is sensible to agree that those proceedings will be discontinued because they cannot stay in being. Otherwise there is the risk of duplication to which my Lord referred.

MR. JUSTICE LEWISON: That sounds right, Mr. Speck provided you are safeguarded in the event of an appeal succeeding.

MR. SPECK: Let me explain the way we understand the position.

MR. JUSTICE LEWISON: Yes.

MR. SPECK: The Patent Office has stayed those proceedings. The Patent Office has said that the stay will be reviewed once the outcome of today is known. It may well be that it decides to continue it because there is a possibility of an appeal. On my feet, we would probably propose to the Patent Office that the stay remains a stay rather than discontinuing proceedings in case this action were to settle or whatever. Things can be stayed, but it really is a matter for the Patent Office as to whether they prefer to deal with it in that way or whether they prefer the file to be closed, as it were, and if anything else happened, to come back on a new application. It is not really a matter for your Lordship ----

MR. JUSTICE LEWISON: No.

MR. SPECK: ---- to dictate the way in which the administration of the Patent Office … because that really is all it is. I think I have made it absolutely clear that there is no question of the Patent Office and your Lordship being asked to determine the same application. But, of course, things may happen in the meantime which may make a stay pending a final decision in the court more appropriate than having them withdraw now. But I do not see that it is anything for your Lordship.

MR. JUSTICE LEWISON: Yes.

MR. SPECK: So we do not invite your Lordship to do anything in relation to that.

MR. ARNOLD: My Lord, I do not think it is necessary to take that any further.

MR. JUSTICE LEWISON: Right. I will not do anything about that. It is ----

MR. SPECK: In fact I am handed an Office Manual that says the usual practice is stay pending resolution of the court proceedings.

MR. JUSTICE LEWISON: Yes.

MR. SPECK: So it may be that that is what they do.

MR. JUSTICE LEWISON: Right.

Apart from the strike out application, the costs will be costs in the case, presumably?

MR. SPECK: Yes.

MR. ARNOLD: My Lord, I would suggest so save for the costs of the amendment application where the usual rule is that the patentee pays the costs at any rate down to this stage because they are seeking an indulgence.

MR. JUSTICE LEWISON: Right.

MR. SPECK: If at the end of the day my friend wants to make such an application, he can make it. So it might be better to reserve them. It is not appropriate to start making costs against me every time we have directions that relate to the amended application.

MR. JUSTICE LEWISON: I am opposed in principle to reserving costs because then some other judge who does not know anything about it has got to work out why they were reserved.

MR. SPECK: The point here, my Lord, is that what my friend is trying to say is that anything that has anything to do with the amendment I have to pay in any event regardless of what happens. That is not, in my experience, the universal order. Haberman v. Jackal was a case where Mrs. Haberman amended her patent. There was no order on the amendment.

So your Lordship should not start making costs orders against my client at this stage just because it involves an application to amend. So either costs in the case, as your Lordship was initially minded to do but if my friend really wants to reserve the position on what is a tiny aspect of the directions for the amendment and try and get me to pay them, then your Lordship will have to reserve them. I suggest that costs in the case is the fairer way.

MR. ARNOLD: My Lord, just to explain, the traditional rule on amending a patent was the patentee paid all the costs of the application even if wholly successful; the reason being, as I have said, that it was regarded as a sheer indulgence to the patentee and he ought to pay the price. More recently it is true to say that a slightly more flexible attitude has been displayed by the courts and there have been one or two incidents where, as regards the costs particularly at the substantive hearing, if the opposition turns out to have been footling (in other words there ought not to have been an opposition, the opposition to the amendment has been spurious) then a different order has been made. My learned friend has given the example where no order as to costs were made. But that is the costs of the battle; whereas we have not got to the battle yet.

MR. JUSTICE LEWISON: No, I follow.

MR. ARNOLD: My clients have not put in the ----

MR. JUSTICE LEWISON: I follow, I follow.

MR. ARNOLD: ---- statement of objection.

34. MR. JUSTICE LEWISON: I will reserve the costs of the application to amend, otherwise costs in the case.

Does that deal with everything?

MR. ARNOLD: My Lord, I believe that is everything.

MR. JUSTICE LEWISON: Thank you all very much.

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