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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Unilin Beheer BV v Berry Floor NV & Ors  EWCA Civ 364 (25 April 2007)
Cite as:  BusLR 1140,  EWCA Civ 364,  FSR 25,  1 All ER 156,  Bus LR 1140
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON
COUNTY COURT (PATENTS COURT)
His Honour Judge Fysh QC
Strand, London, WC2A 2LL
B e f o r e :
LADY JUSTICE ARDEN
LORD JUSTICE JACOB
| Unilin Beheer BV
|- and -
|Berry Floor NV
Information Management Consultancy Limited (t/a Responsive Designs and/or Tapis UK)
WordWave International Ltd
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7421 4040 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Henry Carr QC and Hugo Cuddigan (instructed by Wilmer Cutler Pickering Hale & Dorr LLP) for the 1st and 2nd Defendants
Philip Roberts (instructed by Messrs Rouse Legal) for the 3rd Defendant
Hearing dates : 6th and 7th March 2007
Crown Copyright ©
Lord Justice Jacob:
The Proceedings in this Jurisdiction
i) Unilin's Patent involved was granted on 26th June 2002 by the EPO. It is a European Patent (UK) ("EP (UK)") (see below as to the meaning of this).
ii) Unilin sued Berry Floor, IMC and B&Q (the "Defendants") in the Patents County Court as soon as it was granted. Two types of product known as "Berry" and "Snap-fit" were alleged to infringe.
iii) The claim included a claim for financial relief for infringements committed between the date of publication of the patent application (2nd August 2000) and its grant. Such relief is provided for by s.69 of the Patents Act 1977 ("the Act"), implementing Art. 67 of the European Patent Convention ("EPC").
iv) In addition to defending the infringement claim the Defendants counterclaimed for an order for revocation of the Patent.
v) In September 2003 HHJ Fysh gave judgment for Unilin, holding claim 20 of the Patent valid and infringed by both the Berry and Snap-fit products,  FSR 14.
vi) This Court dismissed the Defendants' appeal by a judgment and order of 30th July 2004,  FSR 6. The Court differed somewhat in its construction of the claim from that of the Judge below, but that made no difference to the result.
vii) The House of Lords dismissed the Defendants' Petition for leave to appeal in February 2005.
viii) That left Judge Fysh's order, and the order of this Court, in place. Besides an injunction (which by then did not matter commercially because the Defendants had changed to a non-infringing product) the key features for present purposes of the order as varied and the order of this court were that:(a) It was declared that claim 20 of the Patent as granted and claims dependent thereon were valid;(b) It was declared that claims 20 and 21 had been infringed by all of the Defendants;(c) Permission was given to Unilin to amend the Patent so as to limit its scope to that of claim 20;(d) The Defendants were ordered to pay 80% of Unilin's costs before HHJ Judge Fysh and all of Unilin's costs in the Court of Appeal;(e) "There shall be" at Unilin's election an inquiry as to damages suffered by Unilin or an account of profits made by the defendants "by reason of [the Defendants'] infringements of the Patent."(f) The costs orders and the inquiry or account order were stayed pending the determination of the issue of whether the specification of the Patent had been framed in good faith and with reasonable skill and knowledge.
ix) The reason for that stay lay in s.63(2) and (3) of the Act. This provides in effect that where a patent has been found only partially valid, neither damages (oddly not an account) nor costs can be awarded unless the patentee proves that the specification was framed in good faith and with reasonable skill and knowledge. Unilin proved the Patent was so framed, both at first instance and on appeal to this Court,  FSR 495. The Defendants were ordered to pay the costs of the dispute about this, both at first instance and on appeal.
x) So Unilin then had unconditional final orders in its favour:a) entitling it to proceed with an inquiry or account in respect of the Defendants' dealings in the Berry products.b) for 80% of the costs of the original trial and all the costs of the appeal, andc) all of the costs of the issue of good faith and reasonable skill and knowledge both at first instance and on appeal.
xi) All of those orders were the result of fully fought contests. No further appeal lies from any of them.
xii) In November 2005 Unilin applied to HHJ Fysh for an interim payment as to costs. By consent he made an order for a payment of £500,000 with liberty to the Defendants to apply for an order for repayment of all or part of that following the ultimate decision in the EPO.
xiii) In March 2006 Unilin applied for directions for the damages inquiry or account of profits. The Defendants applied for a stay of those proceedings and of the assessment of all the costs orders. (Actually they had also made an earlier such application, but nothing turns on that). The basis of the Defendants' application was that the "opposition" (as revocation proceedings are called) to the Patent in the EPO was not yet over and it might be that ultimately the patent would be revoked or limited in such a way that the Berry products would not be covered by it.
xiv) The rival applications were heard and determined by HHJ Judge Fysh by a judgment of 18th May 2006. The Judge first had to consider whether Unilin's entitlement to financial relief and costs was res judicata: if it was, as was common ground, there was no point in a stay. He held that there was no res judicata. That took him to the second point, whether or not he should exercise his discretion to order a stay. He decided to refuse one.
xv) Following preliminary disclosure of figures Unilin elected to take an account. We are told the proceedings are substantial. Unilin contend that "profits by reason of the infringements" include not only profits from sales of the patented goods but also those from convoyed goods (e.g. underfloors), and "bridgehead" profits (i.e. profits made from the non-infringing products substituted for Berry but whose sales can at least in part be attributed to the fact that the business had been built up by Berry and Snap-fit). This will involve possibly difficult questions of causation. There is also said to be a problem of allocation of profits between those made here and those made in Belgium where the infringing products were made (Unilin are also suing in Belgium on the parallel Belgian patent). The hearing of the account is set for September this year.
The EPC, the EPO proceedings and national proceedings generally
Which is "top"? - the EPO or a national court?
This country has agreed with the other States members of the EPC that the final arbiter of revocation under the new legal system is to be the Board of Appeal of the EPO.
For example, it is possible that the court here would come to the conclusion that the patent is valid and infringed. It grants relief which stops a manufacturing line or sales. However subsequently in Patent Office [i.e. EPO] opposition proceedings, which take longer than the proceedings here, the patent is held invalid. That finding of the EPO would be supreme and, I assume that the result would be that, notwithstanding the decision of the English Courts, the defendant would be released belatedly from the effect of injunctive relief which had been granted against him here.
Mr Carr fastened on the words "final arbiter" and "supreme" in the two quotations. But I do not think this is helpful.
"I have already referred to the option to stay the proceedings in this country which, in my view, must be the preferred option when opposition proceedings are before the EPO. Unfortunately the judge did not consider whether in this case a stay would cause injustice. He referred to lengthy periods during which good and valuable patent rights would be unenforceable, but did not consider the possibility that interlocutory relief could be granted in the meantime. The judge looked at the matter as a point of principle so as to decide what was the ambit of the discretion given in section 75 in circumstances when opposition proceedings were in being. He went on to decide that he should confine consideration under section 75 to those matters which would be taken into account by the EPO under their jurisdiction. The fallacy of that approach is that the legislative jurisdiction of the EPO differs to that of the court under section 75 and more importantly the limitation of the court's jurisdiction proposed by the judge does not meet the vice of having two tribunals considering the same question with the risk that they could come to different conclusions."
i) The patent is still under opposition when a national court holds it valid and the EPO then revokes. So the EPO is "top";
ii) The EPO holds the patent valid and a national court subsequently revokes it (there is no estoppel created by an EPO decision as to validity, see Buehler v Chronos  RPC 703). So the national court is "top."
In truth asking which tribunal is "top" is simply not helpful there is just the untidy compromise inherent in the EPC and one which cannot be properly resolved unless and until a rational patent litigation system for Europe is created.
The EPO Proceedings concerning Unilin's Patent
The res judicata issue
Poulton, Coflexip and policy
i) Which of the two situations exists depends solely on the happenstance of the timing of the subsequent revocation. That date is in no way dependent on the speed with which the compensation assessment is carried out.
ii) It is only as a matter of procedural convenience that the compensation is worked out after a finding of infringement of a valid patent. It could be worked out as part of the main trial. That certainly happened in at least one case in my practice at the Bar. It was a case of a pirate who had no defence to infringement and validity and the extent of whose dealings was known by reason of Norwich Pharmacal disclosure from Customs and Excise. The statement of claim not only alleged infringement but also quantified the damage at the same time and summary judgment including a fixed sum was obtained accordingly.
iii) In Poulton Fletcher Moulton LJ specifically dealt with the point, saying:In point of fact such an inquiry takes time, but as regards all legal consequences, it may be supposed to take place at the same instant as the determination of the other issues.
iv) It is not commercially sensible to draw the distinction. Once a man has a vested right to compensation he has a real asset one he can deal in or raise money on. True it is not as good as cash, but it is commercially very different from merely the value of a cause of action.
Revocation has retrospective effect
Res judicata the Main Arguments
"The doctrine of res judicata rests on the twin principles which cannot be better expressed than in terms of the two Latin maxims "interest reipublicae ut sit finis litium" and "nemo debet bis vexari pro una et eadem causa". These principles are of such fundamental importance that they cannot be confined in their application to litigation in the private law field. They certainly have their place in the criminal law. In principle they must apply equally to adjudications in the field of public law. In relation to adjudications subject to a comprehensive self-contained statutory code, the presumption, in my opinion, must be that where the statute has created a specific jurisdiction for the determination of any issue which establishes the existence of a legal right, the principle of res judicata applies to give finality to that determination unless an intention to exclude that principle can properly be inferred as a matter of construction or the statutory provisions."
My opinion on the Main Arguments
Rights Conferred by a European Patent
A European patent shall confer on its proprietor from the date of publication of its grant, in each Contracting State in respect of which it is granted, the same rights as would be conferred by a national patent in that State. Any infringement of a European patent shall be dealt with under the laws of that State.
Effect of the decision
Once the decision revoking the European patent wholly or in part has become final, the patent shall be deemed, to the extent that it has been revoked, not to have had, as from the outset, the effects specified in Article 18.
"A new Article 105a defines the effect of a final decision wholly or partly revoking a European patent. The patent to the extent to which it is revoked, is to be regarded in each State covered by it, as never having had "the same rights as would be conferred by a national patent" granted in that State. It was not thought wise to define the retrospective effect of this provision any more closely, since this would tend to interfere too much with the civil procedures of Contracting States."
Arguments based on Case Law
 We should add that it appears to us that there was no logical or legal basis for the submission of pursuers' counsel that the court could, on the one hand, accept the effect of revocation within the United Kingdom and other designated States, but on the other hand, preserve as between the pursuers and the defenders the liability which the Lord Ordinary had found to be established. A patent such as a European patent is a right of property, and in suing the defenders the pursuers were seeking remedies based on their right of property. That right of property was created by virtue of the European Patent Convention. The effect of revocation under that Convention was that from the outset the pursuers had no substantive right to the patent. The United Kingdom was bound to give effect to that in legislation. There is nothing in the Patents Act which could justify preserving, as between the patentee and another party, some residual effect of a revoked European patent.
Mr Carr particularly relied on the last sentence of this passage.
71. A decision in court proceedings for invalidity will have the effect of binding the unsuccessful party to the extent of past matters, though not for continuing relief. The question is whether a decision of the Registry in opposition proceedings has that effect. Such a decision could at most (as the Chancellor held it did) preclude the unsuccessful opponent from relying on the same grounds in support of invalidity proceedings. If, however, invalidity proceedings were brought, successfully, by a third party, so that the trade mark registration was revoked, there would be no continuing effect of the estoppel against the unsuccessful opponent. That party, like any other, could then proceed with impunity, regardless of the previous registration of the trade mark. In that respect the position would differ from that of a party such as the Defendant in Coflexip v Stolt, because the previous proceedings would not have involved any order (other than as to costs) whose effect was not automatically cancelled by the subsequent revocation of the registration.
72. It seems to us that the co-existence of the provisions for opposition and for a declaration of invalidity has the result that opposition proceedings are inherently not final. They exist at the first stage of the process, before registration. By itself that would not be conclusive, but it seems to us that the fact that, at least, any unconnected third party could challenge the validity of the registration despite an unsuccessful opposition by another, and that, if that challenge were successful, there would be nothing which would bind the unsuccessful opponent (in contrast with the position of a party which had unsuccessfully applied, at any rate to the court, for a declaration of invalidity), shows that the decision of the Registry on opposition proceedings, or more generally a decision to register despite opposition, is not a final decision so as to be capable of being the basis for an issue estoppel. This is true both as regards the grounds of invalidity and as regards the issue of prior use more generally, as relevant to a passing off claim. The same would be true of cause of action estoppel if, contrary to our view expressed above, there was a cause of action at that stage.
73. In terms of what Lord Bridge said in Thrasyvoulou, in our judgment the terms of the legislation are such that, even though the statute has created a specific jurisdiction for the determination of the issue of registrability, which establishes the existence of a legal right, in the sense of leading to the registration of the trade mark which is itself an item of property, the principle of res judicata does not apply to give finality to that determination because the provisions as to a declaration of invalidity show an intention to exclude that principle.
So the position in relation to decisions concerning opposition to trade mark registration in this country and subsequent attacks on validity in the High Court is similar to that in patents. For, as already noted, failure in EPO revocation proceedings does not preclude revocation proceedings in a national court see Buehler.
A point on the form of order
Provided that this Order shall be without prejudice to the [Defendants'] right to apply to his Honour Judge Fysh QC for a stay pending the decision of [the EPO] in respect of the Opposition to the patent.
Conclusion on Estoppel
a) That the Defendants are estopped from challenging Unilin's entitlement to an account of profits, whatever the ultimate result in the EPO;
b) Even if there were no estoppel, past orders as to costs could not be challenged and so the liberty to the Defendants to apply for an order for repayment of costs should be discharged;
c) The Defendants' appeal for a stay of proceedings relating to the account should be dismissed.
Lady Justice Arden:
Lord Justice Mummery:
130.-(1) In this Act, except so far as the context otherwise requires -
"European Patent Convention" means the Convention on the Grant of European Patents, "European patent" means a patent granted under that convention, "European patent (UK)" means a European patent designating the United Kingdom, "European Patent Bulletin" means the bulletin of that name published under the convention, and "European Patent Office" means the office of that name established by that convention;
Effect of European patent (UK)
77.-(1) Subject to the provisions of this Act, a European patent (UK) shall, as from the publication of the mention of its grant in the European Patent Bulletin, be treated for the purposes of Parts I and III of this Act as if it were a patent under this Act granted in pursuance of an application made under this Act and as if notice of the grant of the patent had, on the date of that publication, been published under section 24 above in the journal; and -
(a) the proprietor of a European patent (UK) shall accordingly as respects the United Kingdom have the same rights and remedies, subject to the same conditions, as the proprietor of a patent under this Act;
(b) references in Parts I and III of this Act to a patent shall be construed accordingly; and
(c) any statement made and any certificate filed for the purposes of the provision of the convention corresponding to section 2(4)(c) above shall be respectively treated as a statement made and written evidence filed for the purposes of the said paragraph (c).
(2) Subsection (1) above shall not affect the operation in relation to a European patent (UK) of any provisions of the European Patent Convention relating to the amendment or revocation of such a patent in proceedings before the European Patent Office.
(3) Where in the case of a European patent (UK) -
(a) proceedings for infringement, or proceedings under section 58 above, have been commenced before the court or the comptroller and have not been finally disposed of, and
(b) it is established in proceedings before the European Patent Office that the patent is only partially valid,
the provisions of section 63 or, as the case may be, of subsections (7) to (9) of section 58 apply as they apply to proceedings in which the validity of a patent is put in issue and in which it is found that the patent is only partially valid.
(4) Where a European patent (UK) is amended in accordance with the European Patent Convention, the amendment shall have effect for the purposes of Parts I and III of this Act as if the specification of the patent had been amended under this Act; but subject to subsection (6)(b) below.
(4A) Where a European patent (UK) is revoked in accordance with the European Patent Convention, the patent shall be treated for the purposes of Parts I and III of this Act as having been revoked under this Act.
(5) Where -
(a) under the European Patent Convention a European patent (UK) is revoked for failure to observe a time limit and is subsequently restored; and
(b) between the revocation and publication of the fact that it has been restored a person begins in good faith to do an act which would, apart from section 55 above, constitute an infringement of the patent or makes in good faith effective and serious preparations to do such an act;
he shall have the rights conferred by section 28A(4) and (5) above, and subsections (6) and (7) of that section shall apply accordingly.
Effect of filing an application for a European patent (UK)
78.-(1) Subject to the provisions of this Act, an application for a European patent (UK) having a date of filing under the European Patent Convention shall be treated for the purposes of the provisions of this Act to which this section applies as an application for a patent under this Act having that date as its date of filing and having the other incidents listed in subsection (3) below, but subject to the modifications mentioned in the following provisions of this section.
[It is unnecessary to set out the details. Thee are to the effect that the filing of the application for a EP (UK) is treated as if it were an application made to the UK office.]
Provisions of the European Patent Convention
These are printed as amended
Art. 64 Rights conferred by a European patent
(1) A European patent shall, subject to the provisions of paragraph 2, confer on its proprietor from the date of publication of the mention of its grant, in each Contracting State in respect of which it is granted, the same rights as would be conferred by a national patent granted in that State.
(2) If the subject-matter of the European patent is a process, the protection conferred by the patent shall extend to the products directly obtained by such process.
(3) Any infringement of a European patent shall be dealt with by national law.
Art. 66 Equivalence of European filing with national filing
A European patent application which has been accorded a date of filing shall, in the designated Contracting States, be equivalent to a regular national filing, where appropriate with the priority claimed for the European patent application.
Art. 67 Rights conferred by a European patent application after publication
(1) A European patent application shall, from the date of its publication, provisionally confer upon the applicant such protection as is conferred by Art. 64, in the Contracting States designated in the application.
Art. 68 Effect of revocation of the European patent
The European patent application and the resulting patent shall be deemed not to have had, as from the outset, the effects specified in Arts. 64 and 67 to the extent that the patent has been revoked or limited in opposition, limitation or revocation proceedings.