22 November 2011

Patents: Court of Appeal flushes Earth Closet Orders Down the Pan


The Court of Appeal's decision in Fresenius Kabi Deutschland GmbH and Others v Carefusion 303 Inc [2011] EWCA Civ 1288 (8 Nov 2011) is likely to make life just a little bit harder for patentees, especially the individual inventors and small businesses that I tend to advise and represent. It's tough enough trying to enforce a patent because a common if not the most usual defence is that the patent is invalid. The usual ground for challenging the validity of a patent is obviousness and lack of novelty. Obviousness means that the invention involves no inventive step having regard to the prior art (that is to say everything that has been made available to the public anywhere in the world) while lack of novelty means that the invention has already been invented.

It was not easy to keep up to date with the prior art when most of the world's new technical literature was in English or some other European language but with the rapid growth of China, Korea and East Asian countries an increasing volume of it is in a language that not many Westerners can read. So it happens increasingly frequently that both sides go into a patent dispute without knowing whether the patent is valid or not.

Until Lord Justice Lewison rather contemptuously consigned them to the place that bore their name in paragraph [16] of his judgment, Earth Closet Orders provided some solace for a patentee who suddenly found him or herself confronted with some prior art of which neither party had previously been aware. By the terms of that order (which was also more delicately known as a See v Scott Paine Order (1933) 50 RPC 56) a defendant who suddenly came up with some prior art that put the kibosh on a claim had to pay the costs from the date of his initial challenge to the patent up to the date of his amendment if that amendment forced the patentee to abandon his claim. That was at variance to the usual rule in civil litigation where a claimant has to pay the costs of the action if he discontinues his claim but there was some justice in the practice.

Now the order which has stood the test of time since Baird v Moule's Patent Earth Closet Co. Ltd. on 3 Feb 1876 has been rubbished by a strong Court of Appeal that included The Master of the Rolls and Lord Justice Aikens as well as Lord Lewison. In attacking the order, Lord Justice Lewison imagined the bafflement of a commercial litigator not steeped in patent law when told that "a patentee can sue for infringement and then discontinue his claim against the alleged infringer and consent to the revocation of his patent, yet require the alleged infringer to pay a substantial proportion of his costs". His Lordship considered Lord Esher MR's well known cri de coeur in Ungar v Sugg (1892) 9 RPC 113, 117 that "a man had better have his patent infringed, or have anything happen to him in this world, short of losing all his family by influenza, than have a dispute about a patent" but then asked rhetorically at paragraph [5] whether there was a better reason as "we all know that litigation is expensive."

Apparently counsel for the respondent couldn't think of a better reason but I certainly can. Patent litigation is different from other forms of litigation because it is concerned with the public interest as well as the interests of the parties. A patent is a monopoly which is at first blush against the public interest. It is allowed only because it is a means of encouraging inventors not only to invent but to share the invention with humanity. The courts like the legislature have to balance the imperatives of promoting competition and consumer choice without undermining incentive.

Now despite the fact that litigation in the Patents County Court is a lot cheaper and a lot more predictable than it once was it is still hazardous for SME. Especially if they can find themselves against a multinational with a long pocket. The See v Scott Paine order provided an incentive to such companies to present their best case at the earliest opportunity. Now they can spring a killer amendment on the patentee at any time.

The only crumb of comfort I could find in that judgment is that the Court of Appeal noted a discretion in CPR 38.6 which was considered by Judge Waksman in Brookes v HSBC Bank Plc [2011] EWCA Civ 354 (29 March 2011). I hope that our assigned judges exercise their discretion liberally and wisely.

Should anyone want to discuss this case, costs or patent litigation in general he or she can contact me through this form, through Facebook, Linkedin, Xing or twitter or call me on 0800 862 0055.

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