England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		Royal Courts of Justice Rolls Building, London, EC4A 1NL
		26/10/2011

Mr Justice Floyd :

1. On 16^th June 2011 I handed down judgment in this action and counterclaim. I held that the patent in suit, European Patent (UK) No 1 841 268 ("the patent" or "268") had been infringed by two Nokia devices referred to as the A1 and A2. An issue has arisen as to whether the financial relief which would normally be awarded to IPCom is restricted by the terms of section 63(2) of the Patents Act 1977 which provides that, where a patent is found to be partially valid, the court must take into account in awarding such relief whether the specification of the patent was framed in "good faith and with reasonable skill and knowledge". In this judgment I will use the abbreviation GFRSK, as did Nokia, as a convenient abbreviation for this phrase, where appropriate to do so.

The trial and the added matter attack

2. At trial, the validity of the patent was attacked on a number of grounds under the headings of lack of inventive step, insufficiency and added matter. I rejected all the grounds raised under the first two headings. In addition, I rejected eight out of the nine separate added matter attacks that were pursued at trial. One added matter attack did however succeed. The attack was met by an amendment to the specification which had been proffered by IPCom prior to trial, and which IPCom was content to make if the court found that the attack was a good one. In the result, I allowed the amendment.
3. The added matter attack which succeeded was concerned with the removal from the claim of a requirement that "the access threshold value (S) [is] compared with a random number or with a pseudo-random number (R)"… This feature was replaced with a requirement that access to the RACH be based on an "evaluation" of the access threshold value, without any reference to a random or pseudo-random number. The amendment which I allowed at the trial simply put the random number comparison feature back in.

The prosecution history

4. The original applicant for the group of patents to which 268 belongs was Robert Bosch GmbH. Herr Frohwitter was Robert Bosch's patent attorney. In 2007 Bosch's patent portfolio was assigned to IPCom, a German limited partnership of which Herr Frohwitter was and is a director. 268 was a divisional application at that stage, and included the random number comparison feature, as had the parent application which gave birth to it. Subsequent prosecution was by IPCom, and, presumably, under the direction of Herr Frohwitter.
5. The claims without the random number comparison feature were filed at the EPO on 19^th June 2009. The new claims were accompanied by a chart which showed where it was asserted that there was basis in the parent application for the new claims. The chart did not specifically attempt to justify the removal of the random number comparison feature.
6. Third party observations, a procedure for a third party to comment on claims during prosecution at the EPO, were filed by Nokia in September 2009. Nokia's observations included a specific objection to the removal of the random number comparison from the claims.
7. The counterclaim for infringement in the present proceedings was served in June 2010. IPCom made its conditional application to amend, by reinstating the random number comparison feature, unprompted by any very specific complaint from Nokia, in December 2010.
8. Nokia rely on the fact that the random number comparison feature was apparently regarded by IPCom as its predecessors as important, except for a short period between June 2009 and December 2010 when they sought to get by without it. They say this is an unusual feature of any prosecution, which itself requires explanation from IPCom.

Procedural history and the parties' allegations

9. Such conclusions as I reached at the trial would normally lead to an order for an inquiry as to damages or an account of profits, and an appropriate order for costs. At the hearing set for argument as to the form of order to be made on the basis of my judgment on 8^th July 2011, Nokia contended that such relief in the present case should be refused or limited under the provisions of section 63(2) of the Patents Act 1977. I therefore directed a further hearing at which the issue under section 63(2) should be determined. I gave directions for service of pleadings and evidence in support. These directions were for a statement of case from Nokia and any evidence in support by 15^th July, a statement in response from IPCom and any evidence in support by 22^nd July and a reply from Nokia with any evidence in reply by 28^th July. No orders for disclosure were sought and the hearing was to be fixed on the first convenient date thereafter. In the event, Nokia served no evidence beyond their formal pleading, supported by a statement of truth by their solicitor, Ms Mutimear; and IPCom served no evidence beyond the contents of their formal response, supported by a statement of truth from their solicitor Dr Jelf. Together with their reply, Nokia served a request for information about the knowledge of the person or persons who drafted the patent. IPCom's response, delivered in August, was to the effect that the answers would all relate to privileged information. They accordingly declined to make any substantive response. It is perhaps unfortunate that the substantive hearing was fixed so soon after the end of the vacation, although I attribute no blame for this. The result has been that the matter has come on for hearing without any determination of whether Nokia are entitled to the benefit of any further procedural steps, such as, for example, an answer to their request for information.
10. Nokia's statement of case pleads that the removal of the random number comparison feature and its replacement with a mere evaluation of the access threshold value lacked GFRSK. They rely on the fact that, at [0005] in the application, the random number comparison was stated to be the advantage of the invention. They allege that Herr Gigerich and Herr Frohwhitter of IPCom deliberately deleted the feature for the purpose and with the intention that it would be wide enough to catch implementations without random number comparison. They go on to assert that "on no view did the deleted feature satisfy the requirements" of Article 123(2). Accordingly, Nokia allege that Herr Gigerich and Herr Frohwhitter made a deliberate decision to broaden the scope of protection of 268 knowing that such was contrary to Article 123(2). They also assert that no reasonable patent practitioner could believe that the deleted feature could be deleted in this case without contravening Article 123(2).
11. IPCom's statement of case in response asserts that Nokia's statement of case fails to advance any proper prima facie case of lack of GFRSK. It contends that it is entirely reasonable to put forward a claim based on the second embodiment in the patent which is characterised by the phrase "evaluation of the access threshold value". In support of the fact that a reasonable patent attorney could put forward such a claim, they rely on a number of matters, the principal one of which is the decision of the EPO to grant the patent in the face of this specific objection having been raised by way of third party observations from Nokia.
12. IPCom's response accordingly focuses only on the claim itself. It does not condescend to any detail as to the knowledge or thought processes of IPCom or the patent draughtsman.

The Law

13. Section 63 (1) and (2) in their current form provide as follows:

"(1) If the validity of a patent is put in issue in proceedings for infringement of the patent and it is found that the patent is only partially valid, the court or the comptroller may, subject to subsection (2) below, grant relief in respect of that part of the patent which is found to be valid and infringed.

(2) Where in any such proceedings it is found that a patent is only partially valid, the court or the comptroller shall, when awarding damages, costs or expenses or making an order for an account of profits, take into account the following –

(a) whether at the date of the infringement the defendant or defender knew, or had reasonable grounds to know, that he was infringing the patent;

(b) whether the specification of the patent was framed in good faith and with reasonable skill and knowledge;

(c) whether the proceedings are brought in good faith;

and any relief granted shall be subject to the discretion of the court or comptroller as to costs or expenses and as to the date from which damages or an account should be reckoned.

14. Neither side here relies on subsection 2(a) or (c). Nokia relies on subsection 2(b) and alleges that the specification of the patent, by including claims susceptible to the added matter attack which succeeded, was not framed with GFRSK.
15. Prior to its amendment with effect from April 2006 section 63(2) was in the following form:

(2) Where in any such proceedings it is found that a patent is only partially valid, the court or the comptroller shall not grant relief by way damages, costs or expenses, except where the claimant or pursuer proves that–

(a) the specification of the patent was framed in good faith and with reasonable skill and knowledge, and

(c) the proceedings are brought in good faith, and

In that event the court or the comptroller may grant relief in respect of that part of the patent which is valid and infringed, subject to the discretion of the court or the comptroller as to costs or expenses and as to the date from which damages or an account should be reckoned."

16. Under the unamended section a patentee had to prove that the specification was framed with GFRSK as a pre-condition of the specified relief (although, somewhat oddly, not if he claimed an account of profits). Where a patent was held partially valid and the patentee wanted damages, the issue would inevitably arise: the court was precluded by statute from awarding the specified relief unless satisfied on the issue. There was also no doubt that the burden of proof on the issue would lie with the patentee: the section places the burden on the patentee explicitly. A finding of lack of GFRSK in framing the specification was an absolute bar to damages: there was no basis in the section for reducing damages pro-rata having regard to the seriousness or materiality to the defendant of the faulty draftsmanship or lack of good faith.
17. It would appear that the amendment was made in order to secure this country's compliance with the Directive on the Enforcement of Intellectual Property Rights 2004/48/EC. Article 13 of that Directive provides:

1. Member States shall ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him as a result of the infringement.

When the judicial authorities set the damages:

(a) they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement;

or

(b) as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question.

2. Where the infringer did not knowingly, or with reasonable grounds to know, engage in infringing activity, Member States may lay down that the judicial authorities may order the recovery of profits or the payment of damages, which may be pre-established.

18. A prohibition on awarding damages by reference to circumstances which may have no bearing on the prejudice suffered by the patent proprietor might be thought to be a restriction on damages which goes beyond what is permitted under the Directive.
19. The amended section 63(2) requires the court to "take account of" the matters in subsection 2(a) to (c) when awarding the relevant relief (which now includes an account of profits as well). This differs from the unamended section in a number of respects:

i) There is now a list of three factors to be taken into account.

ii) Neither GFRSK nor any of the other factors is an absolute pre-condition to obtaining relief: they are now merely factors to be taken account of in awarding relief.

iii) It follows that relief may properly be awarded despite a finding of lack of GFRSK. The section enables a graduated approach, taking account of the factors referred to and their seriousness.

iv) The section no longer explicitly allocates the burden of proving GFRSK on the patentee.

20. Of course a court cannot take matter into account if there is no material relevant to that matter properly before it. Neither side suggested that the section requires the court to conduct an investigation into the matters set out in subsections 2(a) or 2(c) if no party chooses to rely on them.
21. A preliminary question is: who now bears the burden of proof in relation to the issue, once raised? IPCom submitted that the burden lay on Nokia. Nokia had raised the issue. They asserted that the drafting of the specification did not meet the standard required and that a lack of good faith was involved. These are matters which, applying general principles, have to be proved by the party who raises them.
22. Nokia submitted that the burden of proving GFRSK lay on IPCom. The skill deployed by, and the knowledge of the draughtsman were matters within the peculiar knowledge of IPCom. If the burden lies on the party attacking the patent, then there may be cases where there was a lack of GFRSK, but it will be impossible to prove.
23. Nokia also submitted that the underlying purpose behind the amended section was a sanction for careless drafting and bad faith, which is put in place amongst other things in the public interest. If that was right, then, as a matter of policy it was right that the onus should lie on the patentee to show that the sanction should not apply in its case. IPCom submitted that the section as amended is more concerned with matters as between the patentee and the defendant.
24. So far as the first point is concerned, Cross & Tapper on Evidence 12^th Edition points out at page 140 that there is nothing in the nature of a general rule that the burden of establishing any defence based on facts peculiarly within the knowledge of the defendant is borne by him. The passage continues:

"The most that can be said by way of generalization is that a party's knowledge of essential facts may lessen the amount of evidence required to discharge an evidential burden borne by his adversary. To quote Lord Mansfield "It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to produce, and in the power of the other to have contradicted"

25. On the second of Nokia's points, there can be no doubt that the unamended section was intended as a sanction. Failure to establish GFRSK barred relief. As to the public interest, Mr Meade reminded me of what Aldous J (as he then was) said in Smith Kline & French Laboratories Limited v Evans [1989] FSR 561, a case concerned with refusing amendment because the patentee had allowed claims to remain in the patent for many years when it knew or ought to have known that they were invalid. He said at 577:

"It is not sufficient to show that nobody has been hurt by the delay, as that is not the reason for the delay. Even if it be assumed that it be a reason, it is not a reasonable reason in that it disregards the public interest in ensuring that patents are amended promptly, when the need arises, so that the public can rely on patents as representing that to which the patentee believes he is entitled."

26. Mr Purvis referred me to what was said by Jacob LJ more recently in Unilin v Beheer, in relation to the unamended section 63(2). That case was concerned with a failure by the patentee at an earlier stage to make his specification conform with amended claims. These failures had nothing to do with the amendment at trial to avoid an item of prior art. The Court of Appeal held that the requirement for reasonable skill did not extend to matters which were irrelevant for the purposes of compliance with the EPC and providing accurate technical information. That principle is not engaged in the present case. The passage relied on by Mr Purvis is that right at the end of Jacob LJ's judgment, where he expressed these obiter views:

"In the result I would dismiss this appeal. I would only add that it is probably time these provisions were reconsidered. It makes no sense, for instance, to restrict the right to damages but not the right to an account of profits (see Codex v Racal-Milgo [1983] RPC 369). Nor does it seem sensible to let a defendant off damages or an account unless he has actually relied upon something done by the patentee. Whether the provisions comply with the Directive on the Enforcement of Intellectual Property Rights 2004/48/EC is also a matter to be explored, but not here."

27. As I have indicated, Jacob LJ's observation about accounts of profits has been taken account of in the new section. His suggestion of the need for a requirement of reliance has not been adopted in express words. However, there can be no doubt that the amended section does not now require the court to "let a defendant off" when there is a lack of GFRSK.
28. When GFRSK was expressed as a condition of granting relief at all, the policy which lay behind section 62(3) was not difficult to see. It was to ensure that patents were drafted with GFRSK. Where GFRSK was proved it was no answer to say that it had no impact on the defendant, or even the public at large. The sin of failing to deploy GFRSK was to be visited with the punishment of withholding relief.
29. I think that the amended section is not intended to act as a sanction against careless drafting or lack of good faith when these matters have no bearing on the damages or other remedy sought by the patentee. Firstly, it seems to me the natural reading of the section no longer justifies such an approach. The court is only required "to take account of" GFRSK "when awarding" the relief. Absent any other direction, it seems to me that the court is now only required to see what bearing the lack of GFRSK has on the particular relief being sought. Secondly, if the section still has a wider import, so that damages and other relief can still be cut down by reference to matters which have no bearing on that relief, then all the section has achieved is to render discretionary a sanction which was previously mandatory. If the purpose of the amendment was to comply with the requirements of the Enforcement Directive, then I cannot see how a discretionary sanction is any less objectionable than a mandatory one. Both give the court power to reduce damages below the actual prejudice suffered by the patentee.
30. Weighing both of Nokia's points, I have come to the conclusion that the burden of establishing a lack of GFRSK lies on Nokia. It is Nokia who seek to establish what is essentially a charge of negligence and bad faith, and they must prove it. Ultimately, as the passage from Cross and Tapper shows, the court will weigh the evidence taking into account "the proof which it was in the power of one side to produce, and in the power of the other to have contradicted."

The Request for Further Information

31. Nokia submit that even if, as I have held, the burden of establishing a lack of GFRSK ultimately rests upon them, they were and remain entitled to an answer to their request for further information. They point out that there is and has been no application to strike out their allegation of lack of GFRSK, and on the basis of the matters pleaded there is a case for IPCom to answer. In refusing to answer the request for information, IPCom have to rely on and justify their reliance on privilege, and have failed to do so. Nokia relied on the well known passage from the opinion of Lord Hobhouse in Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1 at [160]:

"The difficulty in the application of the criterion used by Part 24 is that it requires an assessment to be made in advance of a full trial as to what the outcome of such a trial would be. The pre-trial procedures give the claimant an opportunity to obtain additional evidence to support his case. The most obvious of these is discovery of documents but there is also the weapon of requesting particulars or interrogatories and the exchange of witness statements may provide a party with additional important material. Therefore the courts have in the present case recognised that they must have regard not only to the evidence presently available to the plaintiffs but also to any realistic prospect that that evidence would have been strengthened between now and the trial. Indeed, it was the submission of Mr Stadlen QC for the defendants that Clarke J had applied the right test when he said:

"In my judgment the question in the instant case is whether the Bank  has persuaded the court that the plaintiffs' case is bound to fail on the material at present available and that there is no reasonable possibility of evidence becoming available to the plaintiff, whether by further investigation, discovery, cross-examination or otherwise sufficiently to support their case and to give it some prospect of success. If the Bank discharges that burden, it will follow that the plaintiffs' claim is bound to fail. In that event to allow the action to proceed would serve no useful purpose. It would only involve the expenditure of time and money - in this case a very great deal of both. Neither party would have any legitimate interest in such expenditure because it could not benefit either." (p.6-7)

It is possible that this test, in its reference to cross-examination, may be rather too favourable to the plaintiffs. It is derived from what was said in relation to a plea of justification by Neill LJ in McDonald's Corporation v  Steel [1995] 3 AER 615, a defamation action. He included cross-examination no doubt because in a defamation action, although the burden of proving justification is upon the defendant, the publisher of the libel, it is normal for the plaintiff to call his evidence first; justification is a defence. Where an allegation of dishonesty is being made as part of the cause of action of the plaintiff, there is no reason why the rule should not apply that the plaintiff must have a proper basis for making an allegation of dishonesty in his pleading. The hope that something may turn up during the cross-examination of a witness at the trial does not suffice. It is of course different if the admissible material available discloses a reasonable prima facie case which the other party will have to answer at the trial."

32. IPCom submit that Nokia's case is founded on the allegation that no reasonable patent attorney could draft a claim without the random number comparison feature. If they are right about that then it follows that the claim was drafted without GFRSK, and there is no need for the information sought. If they are wrong, then Nokia have nothing to suggest that the draughtsman did not in fact deploy GFRSK and there is no basis for ordering the information sought.
33. I am unable to accept this argument. Nokia's pleaded case is based on more than the "no reasonable patent attorney" point. Unless the allegations contained in the statement of case fail to cross the striking out threshold, then they call for an answer. In my judgment Nokia's pleading more than adequately meets this not very demanding test.
34. IPCom did not seriously attempt to show that answering the request was entirely precluded by patent attorney or other forms of privilege. Patent attorney privilege attaches to communications, but many of the questions are concerned with the state of IPCom's knowledge. IPCom's knowledge is not itself the subject of privilege. Mr Purvis' argument was that the relevant facts were likely to be so heavily obscured by privileged communications that the court would only get a partial picture of what occurred. That may be right, but is not, in my judgment, a sufficient reason for refusing an order.
35. Accordingly, subject to the point I consider next, I propose to direct an answer to the request before reaching a final conclusion on this aspect of the case.

The consequences of a finding of lack of GFRSK

36. Mr Purvis submitted that this was a case where the court could conclude that there should be no reduction of relief even if there were a finding of lack of GFRSK. Accordingly, he submitted, the court already had adequate material on which to dispose of the issue. He submitted in substance that there was no nexus in the present case between any potential lack of GFRSK and any loss to Nokia. That submission may turn out to be justified and, in its turn, to justify awarding IPCom full relief. But it would not be right to pre-judge that issue, particularly in its impact on a discretionary remedy such as costs, before the court is fully in possession of the facts and in a position to make a finding about GFRSK.

Conclusion

37. In the circumstances I will make an order requiring IPCom to answer the request for information, and give such further directions as are appropriate in the light of my judgment to enable a final disposal of this issue.