England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		The Royal Courts of Justice The Strand London
		01/08/2007

MR. JUSTICE PATTEN :

1. This is an application by the defendant in these proceedings, Visto Corporation, for a stay of a revocation action pending the outcome of EPO opposition proceedings in relation to the patent in suit.
2. The patent in question is number EP(UK) 0996905, which for convenience I will refer to as patent 905.
3. It relates to a system and method for synchronising e-mail across a network. The procedural background against which this application is made is that there are currently two actions between the parties concerned with this application. The first is the revocation action itself, the stay of which is sought. That was commenced by the claimant, Research in Motion UK Limited (RIM), on 30th October last year. The position in that action is that there has been a defence served on 13th December in which Visto has denied the claim for validity, but there is no counterclaim in that action for infringement in respect of any of the claimant's products or applications. RIM produces and markets the well known Blackberry and its software.
4. On 5th December 2006, RIM commenced a second action seeking a declaration of non-infringement in relation to various aspects of its BlackBerry system as described in a product and process description (PPD) dated 19th December 2006. For reasons that will become clear in a moment, it is important to emphasize that whilst the PPD included all the principal parts of the BlackBerry system, it did not include an add on feature comprising a piece of software known as the BlackBerry Mail Connector in respect of which in the DNI action there is a counterclaim by Visto for infringement.
5. The principal purpose of the DNI action was to obtain clarification that no part of the BlackBerry system infringed the defendant's patent. The evidence put in by the defendant is that it was never its intention to allege, either in those proceedings or indeed elsewhere, that the BlackBerry system did infringe the patent with which I am concerned. In the course of various exchanges both in and out of court, that was made clear in the early part of this year.
6. The claimant stressed in the particulars of claim in the DNI action what it described as the substantial importance to it of being able to operate its BlackBerry system without the threat of infringement proceedings hanging over it. It was made clear that that did not, include the Mail Connector, as to which Allen & Overy, who were instructed on behalf of the claimant, said in correspondence that there had been a limited take up. I believe that the figures are that fewer than 1,000 active subscribers have been registered for the Mail Connector software and that it is therefore relatively insignificant in commercial terms to RIM.
7. Eventually in their defence in the DNI action served on 2nd February 2007, Visto gave an acknowledgment of non-infringement of RIM's claims based on the PPD but served a counterclaim limited, as I have indicated, to an allegation of infringement in relation to the Mail Connector as well as two other counterclaims, one for damages for allegedly instituting what was described as an unlawful action in Italy, the second seeking revocation of one of the claimant's Canadian patents which is referred to in the proceedings as patent 727.
8. The result of this was that on 13th April this year, RIM discontinued the DM action so that only the counterclaims that I have referred to remain extant in those proceedings.
9. It is important, therefore, to emphasize against that procedural background that the stay which I am asked to grant is limited to the sole issue of whether or not the patent in suit (number 905) is or is not valid. Both sides have indicated in their skeleton arguments and during the course of their submissions that they are much less concerned about whether the counterclaims made by Visto in the DNI action are tried soon or stayed. They therefore form no part of the relevant matters which I need to consider in deciding whether or not to stay the main action.
10. The application is made by the defendant, it says, to avoid what could be the unnecessary expenditure involved in processing the English action to its conclusion, including an appeal, where the selfsame issues are due to be heard and will be determined in the opposition proceedings in the EPO.
11. The costs of the English action, which is due for trial in January next year, and in respect of which the expert reports are due to be exchanged in September this year, are estimated to be in the region of £1 million on each side. I have no very precise evidence as to how much of that expenditure has already been incurred, although Mr. Watson suggests that so far as the defendants are concerned it is unlikely that to date they have incurred less than 50% or 60% of those costs. His own side's expenditure is at least that.
12. Against that, the claimants say that I ought to refuse the stay for a number of reasons. First of all, they say that under the arrangements for harmonisation of patent procedures in respect of which the opposition proceedings are of course part, the English court retains jurisdiction, unlike in certain other countries such as, for example, Germany, to try the issue of validity, notwithstanding that the opposition procedures themselves remain undetermined.
13. Opposition proceedings are of course in one sense part of the process of determination by the EPO as to what form of grant the patent should take. But the system that has been adopted is such that the national courts have remained free to process their own proceedings in relation to the scope of the validity of the patent. The English court is free to pronounce on the validity of the patent here in advance of any opposition proceedings in the EPO and if that results in a determination of invalidity, it will revoke the patent. Even if the English proceedings are stayed and the EPO upholds the validity of the patent in suit, it would remain open to the claimant in these proceedings to seek revocation in the English proceedings thereafter.
14. I think I should mention at this point in my judgment that Mr. Watson informed me during the course of his submissions that his clients are sufficiently anxious about the need to achieve if possible an early resolution of this issue that were I minded on the basis of the arguments that I have heard to grant a stay of the English action, they would withdraw their opposition in the EPO and on that basis seek to maintain the trial of the English action next January.
15. It seems to me, however, that that of itself cannot be a relevant consideration for me in determining the application itself. The proper way forward is for me to consider the arguments which I have heard, make my decision about it, and then, depending on that decision, decide what I need to do in the light of this change of circumstances.
16. I turn then to the objections which have been raised to the application for a stay. First of all, it is said that the application is made extremely late. That is correct. The English action is well advanced. Both parties have already expended considerable sums in relation to the litigation. The teams have been assembled on each side - counsel, solicitors and experts. The experts are about to produce reports and time has been made available by the court and the experts booked for a trial in January of next year. There is therefore the prospect if I do not interfere with that process, of achieving a fairly speedy resolution of the issue of validity here. An appeal from the judge's decision is unlikely to take much more than a year. All things being equal, there will be a decision of the English court, including a possible appeal, by the end of 2008 or soon thereafter. To halt the trial now will it is said cause considerable inconvenience and expense with the Claimant having in effect to re-assemble a new team if the English action does in due course require to be progressed to a hearing.
17. By contrast, it is agreed that in relation to the opposition proceedings, which are at a relatively early stage, it is unlikely that there will be a resolution of those proceedings taking into account any possibility of an appeal for between four and a half and five years. If of course I stay the English action and the claimants fail in their opposition in the EPO, then they would propose to revive the English proceedings so that the total length of the period leading up to what would be a final determination of this matter as far as the UK patent is concerned could take considerably longer even than the five year period.
18. What the claimant's argument really comes to is that they should not be denied an early opportunity of persuading the court here that the patent is invalid and deploying as part of their case on that the benefits of cross-examination and the other forensic procedures available in the English court, some of which, and certainly this is the position in relation to cross-examination, are not available in the EPO or, for that matter, in most other European jurisdictions. They say that they are almost ready for a trial in January, are about to receive the Defendant's expert evidence and should not as a matter of justice be denied that opportunity and instead be forced to concentrate their efforts and resources on opposition proceedings which are still years away. These are, I think, powerful considerations in favour of maintaining the January trial.
19. The other principal matter which I am asked to consider and which is obviously highly pertinent to the exercise of my discretion is the requirement for commercial certainty. It is said that although there are no specific changes or improvements which are about to hit the market in relation to the BlackBerry system, there will inevitably during the course of the next few years, prior to the determination in the EPO, be further development of the BlackBerry. This is an ongoing process in a highly competitive market where it is essential for commercial success that the software and the other aspects of the applications should be modified, improved and advanced to take account of changes in the market.
20. The claimants say that they should not have to undertake the considerable time, effort and expense involved in that process in ignorance of whether or not what they produce will or will not be an infringement of the defendant's patent. If they are given the opportunity of having an early resolution of that dispute, then their development programme can take account of it. On the other hand, if the matter remains unresolved for a period of four or five years, they will either have to develop their own product on a highly conservative basis, in effect avoiding any possibility of infringement, which may itself impose limitations upon them, or alternatively they will be required to take a chance on the assumption that they will ultimately succeed in the opposition proceedings.
21. Visto's response to this at the hearing has been to offer undertakings that, in respect of any future developments of this kind, they will not seek injunctive relief at any point in the future and will not seek to recover damages or an account of profits based on infringement, either for the period of the stay or thereafter. Assuming that the validity of the patent is upheld any claim would be limited to a reasonable royalty from the date of the decision in the opposition proceedings.
22. The claimant's response to this is that although it removes the possibility of their product being taken off the market, it does not free them from the limitations on their design process that I have referred to, because they do not wish to bring on to the market products in respect of which they may in the future be required to pay an unquantified and perhaps unquantifiable royalty or to have to deal with publicity to the effect that they are marketing an infringing product.
23. There is over and above this an argument that the English proceedings, if they are decided in favour of the claimant, may assist the parties in considering their position in other jurisdictions and may perhaps, although in my experience this is often a forlorn hope, lead to an early settlement of the remainder of the disputes.
24. What this application therefore is about is whether or not the claimants should be denied the opportunity of an early resolution of the validity issue, possibly in their favour, and in that event the benefits of an unfettered development programme over the next four or five years, or whether they should be required to wait until the EPO itself determines the same issue with the commercial uncertainty that provides, but subject to the restrictions on the defendant's power to enforce their patent as set out in the draft undertakings which have been proposed.
25. Against that background I can turn, I think, to the principles which appear to govern the exercise of the discretion which I have to exercise. I have had the benefit during the course of this hearing of being referred to virtually every case that has been decided in recent years, both in the Court of Appeal and at first instance, on the grant of a stay of English proceedings pending EPO opposition proceedings. I think it is only necessary for me to refer to one or two of those decisions. It is necessary to start with two citations from judgments of Aldous LJ in the cases of Beloit Technologies Inc v. Valmet Paper Machinery Inc [1997] RPC 489 and Kimberly-Clark v Procter & Gamble [2000] FSR 235.
26. In the Beloit case Aldous LJ at page 503 said this:

"The fact that there may be proceedings both in the national courts and before the EPO is inevitable as patent rights, both under the Convention and under the Act, are national rights to be enforced by the national courts with revocation and amendment being possible in both the national courts and in certain circumstances before the EPO. That overlap can mean that there are parallel proceedings in this country and the EPO with the potential for conflict. It is desirable for that to be avoided. Therefore the Patents Court will stay the English proceedings pending a final resolution of the European proceedings, if they can be resolved quickly and a stay will not inflict injustice on a party or be against the public interest. Unfortunately that is not always possible as resolution of opposition proceedings in the EPO takes from about 4-8 years."

In Kimberly-Clark he said this:

"It is not sensible for a court in this country to allow proceedings to be heard in this country which duplicate those in the EPO unless justice requires that to happen. At the time that the 1977 Act was enacted, it was envisaged that proceedings before the EPO would be concluded with reasonable expedition. The consequence would be that any overlap between EPO proceedings and national actions could be prevented by staying the proceedings in this country for a short period. In some cases the Patents Court has refused to stay proceedings in this country, despite the obvious desirability of taking that action, because of the injustice that stay would cause."

27. These quotations envisage that absent circumstances which would make it unjust to stay the English proceedings the better course is to allow the EPO proceedings to continue and for the English action to be stayed. There is however, no reference in the passages that I have just read, or I believe elsewhere in Aldous LJ's judgment to any underlying reason for giving primacy to the EPO in relation to a claim for revocation.
28. It has been submitted to me by Mr. Lykiardopoulos that over and above the specific factors such as costs, which he urges as being grounds for maintaining a preference in favour of the EPO proceedings, a further and perhaps overriding reason for preferring resolution in the EPO is that it is the grant-approving body for the patent under consideration and that the opposition proceedings are part of that process and should not be interrupted by proceedings in the national court if that is avoidable. The national court, he says, should allow the EPO to determine the scope, if any, of the patent it has granted and only then should it embark upon its examination of any remaining questions of validity. If the opposition proceedings succeed in toto, then that will of course be unnecessary. This provides an additional reason for taking things in that order. Even if the patent is upheld possibly in an amended form, then he says the English court will at least have the benefit of that determination before it embarks on its own.
29. In Germany, as I have mentioned, revocation proceedings are not permitted pending the outcome of opposition proceedings in the EPO. But no such restriction applies here. The English court has retained the ability to revoke the patent at the trial next January and so, subject to any appeals, to bring finality to this case.
30. The court therefore has, in my judgment, to exercise a discretion when determining an application for a stay based on a consideration of all relevant factors. The desirability of allowing the EPO in effect to finish its work is, I think, one factor in favour of the grant of a stay. But the fact that a claimant does have a right to commence proceedings challenging validity during the currency of opposition proceedings means that the interests of harmonising the procedures for determining issues of validity in relation to European patents is an important but not an overriding consideration in the balancing exercise which has to be performed. It is simply, in my judgment, the starting point.
31. In the subsequent cases that I have been referred to, all of which are decisions at first instance, judges have applied Aldous LJ's guidance with varying results, all dependent upon the facts of the particular case. It is only necessary me to refer to two passages in the judgments. The first is from the judgment of Laddie J in Hunt Technology Ltd v Don & Low Ltd [2005] EWHC 376 in which (at para 7) he referred to the decision of Mann J in Ivax Pharmaceuticals (UK) Ltd v AstraZeneca AB [2004] EWHC 1264 who had summarised the earlier cases as establishing a presumption in favour of a stay unless it would cause injustice. Laddie J said this:

"I have no doubt that Mann J was right. There is a presumption in favour of a stay. However, that does not mean, as at times appeared to be suggested on this application, that this is a difficult presumption for a party resisting a stay to overcome. Absent any other consideration, there are obvious advantages in only having one set of proceedings rather than allowing two to be pursued simultaneously. The proceedings in the EPO may result in the patent being held invalid, in which case the English proceedings would become redundant. Therefore, absent any other consideration, a stay is the appropriate course to adopt. But when there are other considerations, it is for the court to weigh up the pros and cons and see where the justice of the situation lies."

32. The second passage is from the more recent decision of Lewison J in Glaxo Group Ltd v Genentech Inc [2007] EWHC 1414 where he observed (at para 27) in relation to the quotation above from Benoit:

"This observation suggests that a stay of the national proceedings will not be granted unless two conditions are satisfied: first that the European proceedings can be resolved quickly and second that a stay will not inflict injustice on a party or be against the public interest."

33. I think that there is a danger in over-defining the relevant test. The grant of a stay is necessarily a discretionary power, as I have indicated, to be exercised in the light of all circumstances but with a view primarily to achieving a just and proportionate resolution of the dispute between the parties. Although the saving of costs is a relevant factor, it has to be looked at in the light in this case of worldwide litigation about the validity of the same patent which gives the patentee, as in all cases, an important commercial advantage in its own business. This is a highly competitive field and there is, as I see it, a need for commercial certainty at the earliest possible opportunity where that is consistent with all the other relevant considerations.
34. I therefore endorse the approach of Lewison J in the recent case of Glaxo v Genentech in thinking that the need for a speedy resolution of the issues of validity, particularly in a jurisdiction which, on the evidence, is a major market for the claimant's products, outweighs the mere cost savings involved in staying the proceedings. I should add that whilst the costs of the English action are not inconsiderable the position of both parties is that they can meet the costs involved.
35. There may also, although as I have indicated I think this is a lesser factor, be real advantages in having a reasoned decision of the English courts on these issues to assist the parties in their conduct and hopefully the settlement of the remaining litigation.
36. Therefore, given the considerable extra period of time that it will take to determine the opposition proceedings and the issue of validity if I stay the English action, my inclination would be to refuse the stay and allow the revocation proceedings to go ahead.
37. It has been necessary during the course of the hearing to reconsider that view, having regard to the undertakings which, as I have mentioned earlier, have been proffered. In the case of Unisantis v X-ray Optical Systems [2004] EWHC 734 , Lewison J was also minded to reject an application for a stay until he received an offer of undertakings from the defendant which are not dissimilar, though not identical, to the ones that have been offered to me.
38. On the basis of those undertakings, he expressed the view that there was no real injustice to the claimant in staying the action, pending the resolution of proceedings in the EPO, in particular because the threat had been removed of taking the claimant off the market by the grant of injunctive relief on the basis of infringement. The judge went on to say in paragraph 11 of his judgment that although he accepted there would remain a measure of commercial uncertainty, sensible business planning could take place on the basis that the likely limit of the claimant's exposure to damage is a reasonable royalty on infringing terms.
39. That view was, however, expressed in relation to products which might infringe a patent entitled Device for control of radiation and uses thereof which related to a kind of lens called a Kumakhov lens which collimated x-rays for various analytical purposes. It seems to me that the scale and potential application of that invention was considerably more limited than what I am concerned with in this case.
40. Here the Court is concerned with a much broader product range and with the development of a much more sophisticated and commercially-sensitive system. But there is also another important and more general point to be made about undertakings of this kind. The purpose of such undertakings is to attempt to address and remove the concerns of a claimant for revocation that as a result of a stay it will not know where it stands in relation to the Defendant's patent for a much larger period of time and will be at risk of having new products removed from the market and its customers embarrassed if the patent is upheld. The undertakings may address the second of these points, but I am far from satisfied that they can ever fully address the first. The dispute about validity is an attack on a monopoly and there is on any view a public interest in removing from the register invalid patents. Given the advanced state of the English proceedings, the considerable costs already incurred and the potential for wasted expenditure and delay that would be involved in a stay, I am by no means satisfied that even with the undertakings which have been offered in place, it would be just to deprive the claimant of the opportunity of seeking an early resolution of this issue here in England in January rather than having to wait four or five years for a determination in the EPO. For those reasons, I propose to refuse the stay.