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
		21st January 2011

Mr Justice Lewison :

1. In 2003, a technology transfer took place to effect the sale of various aspects of intellectual property. The vendor was DSB Invest Holdings SA and the purchaser was Atrium Medical Corporation. The agreement contained a recital in the following terms:

'Whereas DSB own certain technology and inventions relating to the use of biological fatty acid compounds including Omega 3 and other fatty acids for application as a coating onto implantable medical devices including inter alia coronary stents for therapeutic and/or drug delivery purposes including related know-how and patent applications ("the Technology") …'

2. In addition to the generic description of technology, which was referred to in clause 1 of the agreement, the agreement also included a transfer of DSB's intellectual property rights in a particular pending PCT patent application.
3. The agreement provided for a lump sum payment payable in stages and also a royalty in the event that Atrium sold anything incorporating the technical information. That royalty was payable on a higher basis if the thing sold also fell within the scope of one or more granted patents based on the pending PCT application. There is now a granted European patent based on that application.
4. Atrium sells a coated mesh for medical use known as C-QUR. DSB says that C-QUR incorporates the technical information, and may say that the product also falls within the claims of the granted patent. It is investigating the latter point and has not yet come to a conclusion.
5. Atrium has begun proceedings for declarations that C-QUR does not incorporate the technical information and that C-QUR does not fall within the claims of the patent. Determination of these issues will of course determine whether Atrium is liable to pay the royalty and, if so, whether at the lower or the higher rate. Since, as a result of the agreement, Atrium now owns both the technology and the intellectual property rights covered by the patent and is also the manufacturer of the products in question, there is of course no question of any infringement.
6. Atrium's case has been conducted by Mr John Hepworth, who is a patent attorney and a director of Hepworth Browne Limited. I will regard the two as being interchangeable for this purpose. Mr Hepworth holds a Patent litigator certificate granted by the Chartered Institute of Patent Attorneys.
7. DSB has questioned whether his certificate entitles him to conduct these proceedings. If not, then there may be knock-on effects, meaning that communications between him and his clients will not attract legal professional privilege; and there may also be consequences about the recoverability of costs. There may also be problems about his professional indemnity insurance.
8. The right to conduct litigation is now governed by the Legal Services Act 2007, which came into force on 1st January 2010. Section 12 of the 2007 Act defines a "reserved activity" as including:

"(a) the exercise of a right of audience;

(b) the conduct of litigation …"

9. The entitlement of a person to carry on a reserved legal activity is governed by sections 13 and 18 of the 2007 Act, which provide (so far as relevant) as follows:

'13. Entitlement to carry on a reserved legal activity.

(1) The question whether a person is entitled to carry on an activity which is a reserved legal activity is to be determined solely in accordance with the provisions of this Act.

(2) A person is entitled to carry on an activity ("the relevant activity") which is a reserved legal activity where—

(a) the person is an authorised person in relation to the relevant activity, or

(b) the person is an exempt person in relation to that activity …'

18. Authorised persons.

(1) For the purposes of this Act "authorised person", in relation to an activity ("the relevant activity") which is a reserved legal activity, means —

(a) a person who is authorised to carry on the relevant activity by a relevant approved regulator in relation to the relevant activity (other than by virtue of a licence under Part 5) …'

10. It will be seen that there are two classes of persons entitled to conduct litigation and exercise rights of audience. They are "authorised persons" on the one hand and "exempt persons" on the other. The Court has power under Schedule 3 to the 2007 Act to grant ad hoc exemptions to conduct litigation or to exercise rights of audience, although it has no power to grant ad hoc authorisations.
11. Mr Richard Davis, who appears for Atrium, gave a relatively uncontroversial account of the historical development of rights of audience and privileges of patent agents and patent attorneys. The profession grew up essentially in the nineteenth century and, towards the end of that century, the Chartered Institute of Patent Agents was granted a royal charter. Fellows of the Institute have a number of privileges, including protected titles, and were first granted a limited form of legal privilege by section 15 of the Civil Evidence Act 1968. This was expanded by section 104 of the Patents Act 1977, which enabled a claim for a privilege equivalent to legal professional privilege to be claimed in relation to pending or contemplated patent proceedings. "Patent proceedings" were defined by section 104(4) of the Act as meaning:

"proceedings under this Act or any of the relevant conventions, before the court, the comptroller or the relevant convention court, whether contested or uncontested and including an application for a patent …"

The sorts of proceedings which could be taken under the Act would have included not only proceedings relating to the validity of patents, whether in the context of infringement or revocation, but would also have included such matters as entitlement disputes, compensation for employee inventions, compensation for Crown use and licences as of right.

12. Section 104 of the 1977 Act was superseded by section 280 of the Copyright, Designs and Patents Act 1988. Section 280 as amended is still in force. Mr Davis submits, and I agree, that it is unlikely that section 280 was intended to remove from patent agents and attorneys legal professional privilege or privilege equivalent to legal professional privilege which they already enjoyed under the 1977 Act.
13. Under the 1977 Act, patent agents were entitled to appear before the Comptroller and, on appeal from the Comptroller, before the Patents Court of the High Court. The Patents County Court was established in 1988 and, under the legislation establishing that Court, patent agents had full rights to conduct litigation and also rights of audience before that Court. The special jurisdiction of the Patents County Court is contained in Article 3 of the Patents County Court (Designation and Jurisdiction) Order 1994. That order provides for the Patents County Court to have jurisdiction to hear, amongst other things:

"any action or matter relating to patents or designs over which the High Court would have jurisdiction together with any claims or matters ancillary to or arising from such proceedings."

14. Following the coming into force of the Courts and Legal Services Act 1990, the Chartered Institute of Patent Agents applied for what Mr Davis calls "litigators' rights" in the High Court. Those were granted under the 1990 Act and they remain in force under the Legal Services Act 2007. Fellows of the Chartered Institute are regulated by a body known as IP Reg and ultimately the Legal Services Board to the extent that they are conducting reserved legal activities.
15. The Chartered Institute of Patent Agents were also empowered to make regulations about the conduct of litigation and rights of audience, and they exercised that power. The regulations are the CIPA Higher Courts Qualification Regulations 2007. Under the regulations a person may apply for and be granted a litigator certificate. The holder of a litigator certificate is called a patent attorney litigator. A patent attorney litigator is an authorised person for the purposes of the Legal Services Act 2007 within the terms of the authorisation. In order to qualify for the grant of such a certificate, an aspiring candidate must take examinations. Among the topics upon which he or she is examined are matters such as the general law of contract and conflict of laws, in addition to the more specialist topics relating to intellectual property. Regulation 5 of the regulations provides as follows:

"Without prejudice to any existing rights of audience and to conduct litigation, registered patent attorneys who are Fellows of CIPA and who hold litigator certificates shall have the following rights:

(i) the right to conduct Intellectual Property Litigation in the Chancery Division of the High Court, including the Patents Court and in the County Court including any Court designated as a Patents County Court;

(ii) to the right to conduct appeals in Intellectual Property Litigation from the Chancery Division of the High Court, including the Patents Court, and in the County Court including any court designated as a Patents County Court;

(iii) the right of audience in hearings in the County Court including any court designated as a Patents County Court in Intellectual Property Litigation;

(iv) the right of audience in hearings in private on interim matters ancillary to Intellectual Property Litigation."

16. Plainly, therefore, the definition of "Intellectual Property Litigation" is critical to the scope of the rights conferred by regulation 5. That definition is contained in regulation 3, which provides as follows:

'"Intellectual Property Litigation" means litigation in respect of any matter relating to the protection of any invention, design, technical information or trade mark, or similar rights, or as to any matter involving passing-off, or any matter ancillary thereto.'

17. The principal question is whether this action falls within that definition. The question of legal professional privilege or its equivalent is dealt with in two places. The first is section 280 of the Copyright, Designs and Patents Act 1988, which provides as follows:

"(1) This section applies to communications as to any matter relating to the protection of any invention, design, technical information or trade mark or as to

(a) any matter involving passing off, and

(b) documents, material or information relating to any matter mentioned in paragraph (a).

(2) Where a patent attorney acts for a client in relation to a matter mentioned in subsection (1), any communication, document, material or information to which this section applies is privileged from disclosure in like manner as if the patent attorney had at all material times been acting as the client's solicitor."

18. Section 280 does not require the patent attorney to hold a litigator's certificate. It will, however, be noted that the subject matter of section 280(1)(a) is narrower than the definition of "Intellectual Property Litigation" in regulation 3. The latter includes "similar rights" and also includes "any matter ancillary" to the listed rights; whereas section 280 does not.
19. The other provision that deals with legal professional privilege or its equivalent is section 190 of the Legal Services Act 2007. That section provides, so far as material:

'(1) Subsection (2) applies where an individual ("P") who is not a barrister or solicitor—

(a) provides advocacy services as an authorised person in relation to the exercise of rights of audience,

(b) provides litigation services as an authorised person in relation to the conduct of litigation …

(2) Any communication, document, material or information relating to the provision of the services in question is privileged from disclosure in like manner as if P had at all material times been acting as P's client's solicitor.'

20. This provision only applies to "authorised persons". It does not apply to "exempt persons". If, therefore, the Court gives an ad hoc exemption to a person to conduct litigation or exercise rights of audience, it appears that that person will not be entitled to assert the equivalent of legal professional privilege on behalf of his or her client. Whether this was deliberate I cannot say.
21. Mr Jeremy Reed, appearing for DSB at short notice in place of Mr Michael Hicks, made submissions on the substantive issue, primarily, he said, to ward off a foreshadowed application for costs. He pointed out, quite rightly, that there is no claim by DSB for infringement of any intellectual property right or misuse of confidential information; nor could there be because, under the agreement, all relevant rights were sold to Atrium and Atrium produces the products. Although he accepts that the determination of the dispute will involve consideration of the PCT and the granted patent, there is no allegation that the patent has been infringed. This, he says, is simply a claim for deferred consideration payable on the purchase of the technology under the agreement.
22. Mr Reed's essential submission is that a line has been drawn between cases which relate to the protection of inventions etc, which may be litigated by appropriately qualified patent attorney litigators, and cases which merely relate in some way to intellectual property. The protection of inventions will include claims about infringement or the validity of patents and also ancillary matters such as the grant or refusal of interim injunctions, but, he submits, regulation 3 of the 2007 regulations goes no further than that. The phrase "the protection of" is, he says, an important limitation. This can be contrasted with "any matter relating to patents" etc, which delimits the jurisdiction of the Patents County Court. Since DSB no longer have any rights to protect, this action cannot concern the protection of any such rights.
23. In addition, Mr Reed submits that whether the C-QUR products do or do not incorporate the technology does not depend on DSB establishing that before the sale it had any valid and enforceable intellectual property rights in respect of the matter in question. Technology is not defined in the agreement by reference to any particular intellectual property rights.
24. That, of course, is true. But regulation 3 is not limited to intellectual property rights strictly so called. It includes inventions, whether they are patented or not, and it also includes technical information, which is not further defined. The technology, as defined by the agreement, falls, in my judgment, within that part of regulation 3 which refers to technical information in purely general terms.
25. Second, Mr Reed says that, since the agreement is a worldwide agreement, the definition of technology cannot depend on establishing some sort of territorial intellectual property right.
26. I accept that too. But, in my judgment, that still does not take the case outside the general description of "technical information" in regulation 3. Technical information can in fact be protected in a number of different ways. As Mr Davis points out, it can be protected by equitable rules relating to information received in circumstances imposing an obligation of confidence; or it may be protected by contract. In my judgment, the protection of information by contract is within the regulation.
27. Mr Reed also submits that the question whether the C-QUR products fall within the scope of the granted patent is not enough to bring the litigation as a whole within the definition of "Intellectual Property Litigation".
28. I do not agree. The proprietor of a patent may protect his invention in a number of ways. One is by manufacturing the thing that is covered by the patent and suing infringers. Another is to license the right to manufacture what is claimed by the patent. Both are forms of protection. Mr Reed says that this is not a case of a licence, since there has been an outright sale and all that is in question is the consideration for that sale. But, in my judgment, that is a distinction without a difference. DSB, in effect, protected its intellectual property rights by selling them on terms; and it is the working out of those terms which is the subject matter of the action and the form of protection that is in question here.
29. Even if that is wrong, I consider that the claim to a royalty for the use of the technical information and for the use of matter falling within the claims of a patent is a "similar right" to a claim to protect the invention or the technical information. In each case, DSB is asserting the right to control the use of the technical information or the matter falling within the claims of the patent as the case may be. I accept that in some cases it may be very difficult to say what falls within the definition of "Intellectual Property Litigation" in Article 3 of the 2007 regulations. One may instance a case of professional negligence in which it is alleged that a patent agent was negligent in drafting the claims or the specification of a patent; or, as Mr Davis suggested, there might be a case of a disputed will which bequeathed a patent which turned on difficult questions of trust law. In addition, as Mr Reed points out, copyright is excluded from the definition of "Intellectual Property Litigation". Whether Article 3 applies to cases involving copyright as a "similar right" will have to be decided when it arises. It does not arise in this case.
30. In my judgment, the issues raised in the action do fall within the definition of "Intellectual Property Litigation" in regulation 3 of the CIPA Higher Courts Qualification Regulations 2007. I hold, therefore, that Mr Hepworth is an authorised person entitled to conduct this litigation and to exercise rights of audience in relation to it. He is also entitled to assert legal professional privilege on behalf of his client to the same extent as could be claimed by a solicitor.
For argument as to costs, please see transcript of proceedings
31. This is a matter between Hepworth Browne Limited and the Court to clarify their own ability to conduct the proceedings. As Mr Davis quite rightly accepts, it is a matter of professional conduct, a question of insurance and so on and so forth. DSB did raise the question, but I think they were justified in raising it. As I have said, the boundaries of regulation 3 are somewhat fuzzy at the edges and this is a matter which concerns Hepworth Browne Limited. In my judgment, therefore, no order for costs should be made.
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