England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		Royal Courts of Justice, 7 The Rolls Building, Fetter Lane, London, EC4A 1NL
		24/01/2014

HENRY CARR QC:

1. This is an appeal from a Decision of the Hearing Officer acting for the Comptroller, Mr H. Jones, dated 15th August 2013 ("the Decision under appeal"). The Decision under appeal concerned an application under section 72(1)(a) of the Patents Act 1977 ("the Act") by the Appellant ("MTL") for revocation of UK Patent GB 2432573 ("the Patent") in the name of the Respondent ("AIL").
2. The Hearing Officer concluded that claim 1 of the Patent, both as granted and as proposed to be amended, was anticipated by US2961060 ("Dl"). He further concluded that claim 2 as granted was anticipated by Dl and that claim 2 as proposed to be amended was similarly anticipated and also of unclear scope. He held that proposed amended claims 3 and 4 were lacking in inventive step. However, having considered the conditional amendments proposed by AIL, the Hearing Officer held that there was a reasonable basis for an allowable form of amendment and gave AIL an opportunity to propose such further amendments. He directed that amendments to the claims should be formally requested within six weeks of the Decision under appeal and that, if so requested, they should be advertised in accordance with section 75(1) of the Act. If not requested, or if the Patent was not amended to the satisfaction of the Comptroller, he ordered that it would be revoked.
3. By this appeal, MTL claims that the Hearing Officer erred in law or in principle in allowing AIL a further opportunity to propose amendments to the Patent. MTL accepts that section 75 of the Act allowed the Comptroller a discretion in this respect. However, Mr Vanhegan QC, who appeared on behalf of MTL, submitted that the Hearing Officer did not exercise this discretion in accordance with fundamental principles of law, and in particular procedural fairness.

Summary of MTL's submissions

4. MTL drew attention to a number of decisions of the Court of Appeal where applications to put forward validating amendments following High Court trials had been refused when such amendments would lead to a second trial on validity. See in particular Nikken Kosakusho Works v Pioneer Trading Co [2006] FSR 4; Vector Corp v Glatt Air Techniques [2008] RPC 10; and Nokia GmbH v Ipcom [2011] FSR 15.
5. MTL relied in particular on paragraphs 91 and 97-104 of the judgment of Jacob LJ and paragraphs 33 and 34 of the concurring judgments of Laws and Waller LJ in Nokia. MTL summarised, accurately, the relevant principles in respect of the exercise of the discretion provided by section 75 of the Act following a High Court trial as follows:

(i) Three alternative circumstances in which a patent may be amended are to be distinguished, namely amendment;

(a) before trial;

(b) after trial involving no more than deletion of claims (or re-writing claims merely to exclude dependencies); and

(c) after trial where the claims have been held invalid but the patentee wishes to replace them with what he hopes are validating amendments.

(ii) The court will normally allow amendment in the case of classes (a) and (b), which are really cases of a partially valid patent.

(iii) Class (c) involves proposed claims which were not, and could not have been under attack before the trial in which the patent was found to be invalid. If the court were to allow such proposed claims to be advanced as amendments after the decision, there is almost bound to be a further battle about their allowability or validity. The exercise of the Court's discretion under section 75 to allow the patentee to apply to amend his patent in a class (c) case would be improper because

(a) it would breach the rule in Henderson v Henderson;

(b) it would breach the application of that rule in patent cases, namely that a patentee must bring before the court all issues to be resolved, specifically all claims he wishes to advance, so as to enable the court to conclude the litigation between the parties;

(c) the rules of court in the CPR and in particular the overriding objective were clearly against allowing amendment proceedings which would lead to a second round of proceedings after the conclusion of a first round in which the patent has been found invalid.

6. MTL further contended that these principles applied equally to the exercise of discretion by the Comptroller under section 75 of the Act as to the exercise of this discretion following a High Court trial. It recognised that revocation proceedings before the Comptroller were, in general, intended to be cheaper, simpler and quicker than High Court proceedings. However, it submitted that this meant that there was all the more reason to refuse to allow a further application to propose post hearing validating amendments, absent exceptional circumstances, as this would prolong the proceedings and increase the costs by leading to a second round of proceedings. Therefore this would be procedurally unfair to the applicant for revocation.
7. MTL referred to paragraph 72.43 of the IPO Manual of Patent Practice, which states that:

"When the hearing officer decides that one or more of the grounds for revocation has been made out but that the defects of the patent might be cured by amendment of the specification he may if he sees fit issue an interim decision giving the proprietor a specified period, normally two months, in which to amend to meet the findings and thereby avoid revocation (see also 72.44.1). A factor in deciding whether to give an opportunity to amend (see 75.04) is the necessity for further proceedings to determine validity of any amendments. In Nikken Kosakusho Works v Pioneer Trading Co. [2006] FSR 4, the Court of Appeal drew a distinction between post-trial amendments only involving deletion of invalid claims or re-writing claims to exclude various dependencies, and those where the patentee sought to introduce a different claim which had not been under attack at the trial, where there was bound to be a further battle in proceedings over the proposed amendments to determine their validity. Considering the overriding objective of the Civil Procedure Rules that in any given litigation the parties are required to bring forward their whole case and the specific requirements of Part 1.1.2 of the CPR that the court should deal with cases justly by saving expense and ensuring that they were dealt with expeditiously and fairly, the court held that the latter sort of post-trial amendment should not be allowed if it would involve a second trial on validity. Where the hearing officer does not see fit to allow such an opportunity to amend, or it appears that no saving amendment is possible, a final decision should be issued revoking the patent without allowing an opportunity to amend."

8. MTL's case was that this paragraph lacked clarity. Insofar as it indicated that a patentee would normally be given an opportunity to propose category (b) deleting amendments following a decision on validity, it was unobjectionable. Insofar as it indicated that this opportunity would be given in respect of category (c) validating amendments, then it was an incorrect summary of the law.
9. As to the facts of the present case, MTL pointed out that AIL had offered several conditional amendments during the course of the proceedings, whilst maintaining the validity of the Patent as granted. It had proposed conditional amendments in its Reply to MTL's Statement of Grounds on 31st July 2012; it had filed an amended version of the conditional amendments in its Reply to MTL's supplementary statement on 13th March 2013; and in the same document had suggested yet further wording to amend claim 1. In these circumstances it was contrary to the principles set out in Nokia (supra) to give yet another opportunity to AIL to offer further amendments, particularly as it was likely that those amendments would lead to a further dispute in relation to anticipation, lack of inventive step and lack of clarity.

Summary of AIL's submissions

10. Mr Alan Johnson of Bristows, who appeared on behalf of AIL, reminded me that since this was an exercise of discretion by the Hearing Officer, on this appeal the Court must consider whether the decision was one which no reasonable Hearing Officer could have made, or as it was put in G v G [1985] 1 WLR 1507 at 1523: whether the Hearing Officer "has exceeded the generous ambit within which reasonable disagreement is possible". He characterised the question as whether on a case management issue (a procedural matter), the Office is bound to follow the procedural approach taken by the Senior Courts. He submitted that there was a distinction between matters of substantive law, where clearly the approach of the Senior Courts must be followed, and procedural matters, where the Senior Courts should not interfere with the practice of the Patent Office. He further submitted that the Decision under appeal was entirely in line with Office practice and referred to a number of other decisions to illustrate this point, including AIpharma v Vericore (O/125/02); Smith International Inc v Specialised Petroleum Group Services BL (O/352/04) affirmed on appeal by Lewison J (as he then was) at [2005] EWHC 686; Robert Leigh v Eurokrete Holdings (BL O/277/10); and Linstol v David Huang (BL O/015/12).
11. AIL relied in particular on the Smith International case, where all claims were found to be invalid, but an opportunity to amend was offered despite there being no suggestion that there was an obviously available validating amendment available. In that case the exercise of discretion under section 75 was specifically considered by the Hearing Officer, Mr Hayward. He identified several factors for consideration, which may be summarised as follows:

(i) Although it is undesirable for the comptroller and the courts to have significantly different approaches, this does not establish a principle that claim-validating amendments should never be allowed after an adverse finding on validity [paragraph 88].

(ii) Where the Hearing Officer is persuaded that there is any scope for a claim-validating amendment, the patentee should be given the chance to amend [paragraph 89].

(iii) There is a difference between revocation and infringement actions and there should be "a more-generous attitude to post-decision amendments in revocation actions" [paragraph 91].

12. This case went to appeal (Smith International Inc. v Specialised Petroleum Services Group Ltd [2005] EWHC 686 (Ch)), and Lewison J (as he then was) dismissed the appeal and cross-appeal in respect of the validity of the patent in suit. He then considered the decision of the Hearing Officer to allow an opportunity to offer amendments and said:

"72. Mr Miller submitted to Mr Hayward that SPS should not be allowed to make "claim-validating" amendments to the claims once the determination had been made. He submitted that except in special circumstances, which he said were not suggested to exist, no "claim-validating" amendment should be allowed after what was, effectively, a trial. Mr Hayward considered a number of authorities and concluded that they did not lay down a rule that "claim-validating" amendments should never be allowed after trial, at least in revocation proceedings. It is necessary to consider the circumstances in each case.

73. However, because he was not asked for permission to make any particular amendment, he made no decision allowing or disallowing amendments. He merely said that if SPS wanted to ask for permission to amend, they should do so within a stipulated time limit; and he would consider the application on its merits.

74. Mr Miller accepted that there was no formal decision on amendment against which he could appeal, but said that Mr Hayward's approach was wrong; and that I should give guidance to the Patent Office about what approach should be followed. He made very interesting submissions on the practice of the court and the Patent Office in allowing or disallowing amendments, which I found very educational.

75. I do not wish to sound prissy about this; but it is not my function to give gratuitous advice to the Patent Office even if, as a newcomer to this field, I were confident enough to do so. Whether an amendment should or should not be allowed will have to await an actual ruling on a formulated amendment."

13. AIL also submitted that in cases before the High Court different criteria are plainly appropriate when the litigation costs in hard fought cases are typically in excess of £1M per party. In such cases, which also consume a large amount of Court time, it is important that cases are not re-litigated by causing a second validity trial. In the Office, costs per side in revocation cases are more typically a few per cent of the High Court figure (and the present case is at the low end of that range).
14. Turning to the facts of the present case, AIL challenged the extent to which there could be re-litigation. It accepted that MTL would be entitled to oppose the new amendment, for example on the basis of added matter, but submitted that any attempt to invoke a ground such as lack of novelty or obviousness would be doomed to fail because the Hearing Officer had already found that a valid claim based on the form of claim 2 could be drafted, albeit that he did not suggest a form of claim.
15. AIL further submitted that it was a relevant factor in the present case that the matter was decided on the papers by consent of the parties, without an oral hearing. The absence of an oral hearing deprived the patentee of an opportunity to discuss in person with the Hearing Officer his concerns about the form of claim 2 which had been offered, or to explore other possible amendments. This opportunity was given up in the knowledge of the Office's practice. If the practice were to be changed, litigants, especially patentees, would be less inclined to consent to there being no oral hearing, which would increase the cost of litigation, as well as occupying more Office time.

My conclusions

16. I do not accept that where the Office has developed a procedural practice, the Courts should not scrutinise it on appeal, and I find no suggestion that this should be the case in the Manual of Patent Practice. The Office needs to ensure that its practice is procedurally fair and accords with the overriding objective, which is contained in Rule 74 of the Patents Rules 2007 (as amended). Principles explained by the Senior Courts to ensure that these objectives are met will of course be taken into account by the Office. This is already reflected in paragraph 72.43 of the Manual of Patent Practice, which expressly refers to the Nikken case in relation to the exercise of discretion under section 75(1).
17. Furthermore, and in spite of Mr Johnson's diligent research, I did not find the Smith International case of great assistance. It was decided before the Court of Appeal authorities relied on by MTL and so, although it may fairly be said that the general reluctance to allow post-trial amendments pre-dated Nikken, the Hearing Officer did not have that guidance in mind when indicating the factors to be considered in allowing a further opportunity to submit amendments.
18. Since I was asked to consider the decision of the Hearing Officer in Smith International, I shall review it in the light of the subsequent Court of Appeal authorities. In my judgment it is no longer correct that where there is any scope for a claim-validating amendment, the patentee should be given the chance to amend after an interim decision has been handed down [c.f. Smith International paragraph 89]. Nor do I agree that there is a difference between revocation and infringement actions and there should be "a more-generous attitude to post-decision amendments in revocation actions" [c.f. Smith International paragraph 91]. A patent is a right in rem and, unless revoked, deters the public from working within its claims. Revocation proceedings are normally commenced by parties who are concerned about being sued for infringement. The present case is illustrative of this point, since AIL had sent two letters before action to MTL threatening infringement proceedings before MTL commenced its claim for revocation. I also note that Vector v Glatt was a revocation case, yet the Court of Appeal considered that the patentee should not be allowed an opportunity to amend post-judgment, on the basis that this might result in a further trial at first instance.
19. I also consider that the issue before me is different from that addressed by Lewison J in Smith International. In that case, the Judge had dismissed the appeal and cross-appeal in relation to validity, and declined to review Office practice where no amendment was before him. In this case, there has been full argument about whether the current Office practice complies with procedural fairness in the light of the Court of Appeal decisions referred to above, which were decided subsequent to Smith International.
20. However, I do accept that the discretion under section 75(1) is accorded to the Hearing Officer on behalf of the Comptroller, and the context in which that discretion is exercised may well be different to the context of High Court proceedings. Revocation proceedings before the Comptroller are frequently simpler and less costly and time-consuming than challenges to validity in the High Court and significantly less resources may be devoted to them. Therefore, considerations of what is procedurally fair may well be different
21. In my view, the exercise of the discretion by the Comptroller under section 75(1), post hearing, needs to have regard to all circumstances which are relevant to the question of procedural fairness to the parties. Depending on the facts of the case, these are likely to include:

(a) The resources already devoted by the parties to the proceedings. In cases where there has been extensive evidence, full oral argument and cross-examination, it is likely to be procedurally unfair to allow a further opportunity to offer a validating amendment, where this may lead to a further round of the litigation. On the other hand, where there has not been a hearing at all, it may well be procedurally fair to allow a further opportunity, with short further written submissions.

(b) The extent of any re-litigation as a result of the amendment. Will a further hearing be necessary, and how much time and cost is this likely to involve? The resources already devoted by the parties to the proceedings will be indicative of this.

(c) The likelihood that a valid amendment can be proposed. Where the Hearing Officer concludes that substantive objections to validity are likely to be overcome by amendment (for example where the objection to the amendment is based on its wording alone) it may well be worthwhile to offer an opportunity to propose such an amendment. There will, of course, be an opportunity for the opposite party to object to the amendment, once it is proposed.

(d) Whether there is evidence that prejudice will be caused to the applicant for revocation by the delay that will be occasioned by a post-decision amendment application.

22. This means that an opportunity to amend after an interim decision will not be accorded to the patentee as a matter of course. However, it may well be fair to give such an opportunity in appropriate cases. My conclusions are consistent with paragraph 72.43 of the Manual of Patent Practice, but add more detail about the way in which the discretion should be exercised.
23. Turning to the facts of the present case, I have no doubt that the Hearing Officer was correct to afford AIL the opportunity to request amendments within six weeks of the date of the decision under appeal. First, the parties consented to a decision without an oral hearing. This saves time and costs, but means that the parties are unable to explore their submissions with the Tribunal and answer questions from the Tribunal.
24. Secondly, the Decision under appeal was reached on the basis of short written submissions from the parties. The Patent is technically simple, as is the prior art. The parties submitted some limited evidence, but it played very little part in the Decision under appeal.
25. Thirdly, at paragraph 26 of the Decision under appeal, the Hearing Officer concluded that:

"..although the way in which proposed claim 2 is worded means that D1 can be said to anticipate the invention....I consider that it would be perfectly possible to encapsulate the offset mast arrangement of the invention into a form of words that is clear and does not add subject matter, and to avoid anticipation or be rendered obvious by document Dl."

26. In those circumstances the opportunity for re-litigation is limited. MTL will of course be entitled to object to whatever amendment is proposed by AIL. Such amendment may not be accepted by the Comptroller. However, such further proceedings are likely to take the form of short written submissions, consistent with the admirable restraint that the parties have exercised to date.
27. Accordingly, this appeal is dismissed.