United Kingdom House of Lords Decisions

United Wire Limited v. Screen Repair Services (Scotland) Limited and Another and Others [2000] UKHL 42; [2000] 4 All ER 353 (20th July, 2000)

HOUSE OF LORDS

Lord Bingham of Cornhill Lord Steyn Lord Hoffmann Lord Cooke of Thorndon Lord Hutton

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

ON 20 JULY 2000

LORD BINGHAM OF CORNHILL

My Lords,

    I have had the benefit of reading in draft the opinion of my noble and learned friend Lord Hoffmann, with which I fully agree. I gratefully adopt his account of the facts and of the issue in this case.

    The grant of a patent for a product rewards the inventiveness of the patentee by giving him, for the term of the patent, a monopoly right to exploit the patented product which he has invented. The product entitled to protection is that specified in the claim of the patent as interpreted by the description and any drawings contained in the specification: Patents Act 1977, section 125. The protection is against infringement which, in the case of a product, means making, disposing or offering to dispose of, using or importing the protected product, or keeping it for disposal or otherwise, without the consent of the patentee: section 60 of the Act. In any action brought by a patentee alleging infringement the crucial underlying question must always be whether what the defendant is shown to have done has deprived the patentee of the full rights to which his patent entitled him.

    I do not think that in a case such as the present this question is best approached by considering whether the defendant has "repaired" the patented product. For repair may involve no more than remedial action to make good the effects of wear and tear, involving perhaps no replacement of parts; or it may involve substantial reconstruction of the patented product, with extensive replacement of parts. Both activities might, without abuse of language, be described as repair, but the latter might infringe the patentee's rights when the former did not. Aldous L.J., as I respectfully think, approached the question in the right way in the present case when he said (at page 14 of the transcript of the Court of Appeal judgment):

"It follows that acts as prohibited by section 60 are infringing acts whether or not they can be categorised as repairs. It is therefore better to consider whether the acts of a defendant amount to manufacture of the product rather than whether they can be called repair, particularly as what could be said to be repair can depend upon the perception of the person answering the question. Even so, when deciding whether there has been manufacture of the product of the invention, it will be necessary to take into account the nature of the invention as claimed and what was done by the defendant."

    The judge was "narrowly persuaded" that the defendants' reconditioning operations were to be regarded as no more than repairs, but he did not, like the Court of Appeal, concentrate his attention on whether the defendants had made the patented product. The Court of Appeal concluded on the facts that the defendants had made the screen assembly which was the subject of the first claim in each of the patents. This was a conclusion clearly open to the court. I see no reason to disturb it. By selling their products on the open market the plaintiffs exhausted their rights as patentees, but that does not prevent them complaining of infringement by a party who has made the product without their consent and it cannot be said that they impliedly licensed the defendants to make it.

    For the reasons more fully given by my noble and learned friend Lord Hoffmann, and for these reasons, I would dismiss this appeal.

LORD STEYN

My Lords,

    I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Bingham of Cornhill and Lord Hoffmann. For the reasons they give I would also dismiss the appeal.

LORD HOFFMANN

My Lords,

This is an action for the infringement of two United Kingdom patents for improvements to sifting screens used to recycle drilling fluid in the offshore oil-drilling industry. Although known colloquially as mud, the fluid is quite an expensive mixture of chemicals which is pumped down the shaft for various purposes including the lubrication and cooling of the drilling bit. It is then brought back to the surface together with quantities of foreign solids which must be removed before the fluid can be used again. For this purpose it is filtered by being passed through mesh screens vibrating at high speed in a vibrating sifting machine.

One source of difficulty in the operation of sifting machines is the clogging of the meshes by small particles or viscous liquid. The plaintiff's patents were designed to ameliorate this problem. The nature of the invention appears sufficiently from the first claim in each. U.K. Patent No. 1, 578, 948 ("948") claims:

"a sifting screen assembly for use in a vibratory sifting machine comprising a frame and two screens superimposed one on the other and adhesively secured at marginal edge portions thereof to said frame, the upper screen having a relatively fine mesh, the lower screen having a relatively coarse mesh, both screens being tensioned, and the upper screen being at a lower tension than the lower screen, so that, when the frame is vibrated, the screens strike each other so as to effect or assist in effecting clearing of blockages or to prevent or reduce the possibility of blockage of the screens."

    U.K. Patent No. 2, 161, 715 ("715") claims:

"A filtering screen comprises (a) a first filter mesh, (b) a second filter mesh having a different mesh size from the first and overlying the first mesh, and (c) an apertured support member to which both of the meshes are bonded both around the periphery and around the apertures, so as to maintain the two meshes in tension when fitted in use into a sifting machine, the tension in one of the meshes being greater than that in the other, (d) wherein the apertured support member is flexible and is adapted to be flattened on being fitted into said sifting machine so as to restore the desired differential tensions in the meshes on being fitted therein."

    Thus both patents are for a screen consisting of a frame or "support member" to which two meshes of different mesh sizes are "bonded" or adhesively secured at the periphery so as to be at different tensions. The differences are the striking screens of the first patent and the flexible apertured support member (to maintain differential tension) of the second. Further detail may be found in the judgments of the courts below.

    The meshes of the screens made according to both patents quickly become torn in use. To some extent they can be patched but this reduces their efficiency because the patches are impermeable or "blind." The plaintiffs, who are the market leaders in selling the complete vibratory sifting machines, therefore also enjoy a captive and profitable aftermarket in selling replacement screens made in accordance with their inventions.

    The defendants have attempted to penetrate this market by selling reconditioned screens made from the plaintiffs' own frames. The frames, which the plaintiffs make from metal, weigh about 10 kilos. The judge described them as looking "more like a drain cover than a picture frame." They are durable in relation to the rest of the materials of the screen. The defendants acquire the frames from the plaintiffs' customers and strip them down to the bare metal by sandblasting. They recoat them with adhesive polyethylene and attach the two layers of mesh, coarse below and fine above. The differences in the sizes of the mesh produces the necessary differential tensions when both are tensioned together. Heat is then used to bond the meshes to the polyethylene coating of the frame, the selvage of mesh around the frame is cut off and the edges trimmed and taped. The screens are then sold to the customers. They received a credit for supplying the frames but a given customer will not necessarily get back the same frame.

    The defendants say that although the product which they sell is a screen in accordance with the invention, they do not infringe because they do no more than repair screens which have been marketed with the consent of the plaintiffs. The grounds upon which this is said not to constitute an infringement is put in various ways. First, it is said that, in marketing the screens, the plaintiffs impliedly licence anyone who acquires a screen to prolong its life by repair. Secondly, it is said that the marketing of the screens constitutes an exhaustion of any rights which a repair might infringe. Thirdly, it is said that a person who repairs a screen does not "make" that screen within the meaning of the definition of an infringement in section 60(1)(a) of the Patents Act 1977.

    The judge (Robert Walker J.) held, following the decision of the Court of Appeal in Solar Thomson Engineering Co. Ltd v. Barton [1977] R.P.C. 537, held that there was an implied licence to repair and that he was "narrowly persuaded" that the defendants' activities should be regarded as repairs. He said that the frame was an essential component and that when the defendants attached a new double mesh "the screen's useful life [was] in that way prolonged."

    The Court of Appeal (Evans, Aldous and Ward L.JJ.) did not find the concept of an implied licence useful. They said that it was better to concentrate on whether the defendant had "made" the product within the meaning of section 60(1)(a). If a repair was not an infringement, it was because it did not infringe the patentee's right to prevent others from making the product. Aldous L.J., with whom the other Lords Justices agreed, said that in this case the defendants had made the product. They had repaired or reconditioned the frame and then used that frame to make a screen in exactly the same way as if they had bought the frames as components from a third party.

    My Lords, the point is a very short one and in my opinion the Court of Appeal was right. The concept of an implied licence to do various acts in relation to a patented product is well established in the authorities. Its proper function is to explain why, notwithstanding the apparent breadth of the patentee's rights, a person who has acquired the product with the consent of the patentee may use or dispose of it in any way he pleases. The traditional Royal Command in the grant of a patent forebode others not only to "make" but also to "use, exercise or vend" the invention. Similarly, section 60(1)(a) provides that a person infringes a patent for a product not only if he "makes" it but also if, without the consent of the proprietor, he "disposes of, offers to dispose of, uses or imports the product or keeps it whether for disposal or otherwise." Put shortly, the problem is to explain why, for example, a patentee cannot not complain when someone to whom he had sold the patented product then, without any further consent, uses it or disposes of it to someone else. The answer given by Lord Hatherley L.C. in the leading case of Betts v. Willmott (1871) L.R. 6 Ch. App. 239, 245 (which concerned the resale of a patented product) was that he did so by virtue of an implied licence.

"I apprehend that, inasmuch as [the patentee] has the right of vending the goods in France or Belgium or England, or in any other quarter of the globe, he transfers with the goods necessarily the licence to use them wherever the purchaser pleases. When a man has purchased an article he expects to have the control of it, and there must be some clear and explicit agreement to the contrary to justify the vendor in saying that he has not given the purchaser his licence to sell the article, or to use it wherever he pleases as against himself."

    An alternative explanation, adopted in European patent systems, is that of exhaustion of rights. The patentee's rights in respect of the product are exhausted by the first sale: see Merck & Co. Inc. v. Primecrown Ltd. [1997] 1 C.M.L.R. 83, 119. The difference in the two theories is that an implied licence may be excluded by express contrary agreement or made subject to conditions while the exhaustion doctrine leaves no patent rights to be enforced.

    Where however it is alleged that the defendant has infringed by making the patented product, the concepts of an implied licence or exhaustion of rights can have no part to play. The sale of a patented article cannot confer an implied licence to make another or exhaust the right of the patentee to prevent others from being made. A repair of the patented product is by definition an act which does not amount to making it: as Lord Halsbury L.C. said of the old law in Sirdar Rubber Co. Ltd. v. Wallington, Weston & Co. (1907) 24 R.P.C. 539, 543:

" you may prolong the life of a licensed article but you must not make a new one under the cover of repair."

    Repair is one of the concepts (like modifying or adapting) which shares a boundary with "making" but does not trespass upon its territory. I therefore agree with the Court of Appeal that in an action for infringement by making, the notion of an implied licence to repair is superfluous and possibly even confusing. It distracts attention from the question raised by section 60(1)(a), which is whether the defendant has made the patented product. As a matter of ordinary language, the notions of making and repair may well overlap. But for the purposes of the statute, they are mutually exclusive. The owner's right to repair is not an independent right conferred upon him by licence, express or implied. It is a residual right, forming part of the right to do whatever does not amount to making the product.

    In Solar Thomson Engineering Co. Ltd v. Barton [1977] R.P.C. 537 the Court of Appeal held that there was an implied licence to repair. But the juridical nature of the right to repair was not in issue. The debate was over whether or not the defendants had, as the plaintiff's counsel contended (at p. 544) made a "new merchantable article." So the real issue was whether the defendants had made the patented product. Buckley L.J. quoted the remark of Lord Halsbury L.C. which I have already cited. He said that the question was one of fact and degree and said (at p. 555) that the "cardinal question" was whether "what has been done can fairly be termed a repair, having regard to the nature of the patented article." The context shows that Buckley L.J. saw no difference between this question and the question of whether, having regard to the nature of the patented article, the defendant could be said to have made it. Speaking for myself, I prefer the latter formulation.

    Mr Fysh Q.C. submitted that as the question was one of fact and degree, the Court of Appeal should not have reversed the trial judge. He cited some remarks of my own in Biogen Inc v. Medeva Plc. [1997] RPC 1, 45 about the need for appellate caution in reversing a judge's evaluation of the facts in terms of some legal standard such as negligence, obviousness or (in this case) the boundary between making and repairing. But in this case the Court of Appeal was in my opinion entitled to substitute its own evaluation because I think, with great respect to the judge, that he did not correctly identify the patented product. He said that the frame was an important part of the assembly and that the defendants had prolonged "the screen's useful life." It is quite true that the defendants prolonged the useful life of the frame. It would otherwise presumably have been scrapped. But the screen was the combination of frame and meshes pre-tensioned by attachment with adhesive according to the invention. That product ceased to exist when the meshes were removed and the frame stripped down to the bare metal. What remained at that stage was merely an important component, a skeleton or chassis, from which a new screen could be made.

    I would therefore dismiss the appeal.

LORD COOKE OF THORNDON

My Lords,

    I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Bingham of Cornhill and Lord Hoffmann. For the reasons they give I would also dismiss the appeal.

LORD HUTTON

My Lords,

    I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill and Lord Hoffmann and for the reasons which they have given I too would dismiss the appeal.