05 April 2013

Make or Mend: Schütz v Werit reaches the Supreme Court

Schütz (UK) Ltd v Werit (UK) Ltd  [2013] UKSC 16 Supreme Court Lords Neuberger, Walker, Mance and Kerr and Lady Hale)

This was an appeal against the decision of the Court of Appeal in Schütz (UK) Ltd v Werit (UK) Ltd [2011] EWCA Civ 303, [2011] Bus LR 1510, [2011] FSR 19 which I had blogged in "Patents: Schütz (UK) Ltd v Werit (UK) Ltd" on 2 April 2011.

The point in this appeal was whether cross-bottling - the practice of replacing the a 1,000 litre bottle  that had been supplied by Schütz (U.K.) Limited, the exclusive licensee of a patent for a type of intermediate bulk carrier ("IBC") like the one pictured above, with one supplied by a third party such as Werit - amounted to making for the purpose of s.60 (1) (a) of the Patents Act 1977.  In the Patents Court, Mr. Justice Floyd held that it did not (see  Schutz (UK) Ltd v Werit UK Ltd and Another [2010] EWHC 660 (Pat), [2010] Bus LR 1244, [2010] FSR 22). The Court of Appeal (Lord Justices Ward, Jacob and Patten) disagreed and reversed his decision.

The patent in suit was European Patent (UK) 0 734 967 for a pallet container. The relevant claim was for:
"[A] Pallet container for the transporting and storing of liquids, having a flat pallet, an exchangeable inner container made of plastic material with an upper, closable filler opening and a lower emptying device and also, surrounding the inner container, one outer sleeve which consists of vertical and horizontal lattice bars made of metal which support the plastic inner container filled with liquid,
[B] the lattice bars which are configured as tubes being indented at the intersection points to form trough-like, double-walled recesses extending in the longitudinal direction of the lattice bars
[C] in such a manner that at each intersection point between the longitudinal edges of the recesses of two lattice bars lying perpendicularly one above the other there arise four contact points with a material accumulation respectively corresponding to the quadruple lattice bar wall thickness, and the four contact points of the two lattice bars being welded together at the intersection points,
[D] characterised in that the trough-like recesses of the vertical and horizontal lattice bars have a central raised part extending across the cross-section of the recesses,
[E] two lattice bars respectively lying one above the other at the intersection points are welded together at the four contact points of these raised parts and the incisions of the recesses of the lattice bars adjacent on both sides to the raised part
[F] with the contact and weld points form restrictedly elastic bending points with a reduced bending resistance moment relative to the raised part for relieving the weld joints at the intersection points upon application of static and/or dynamic pressure on the lattice sleeve."
Delivering judgment on behalf of the whole Court, Lord Neuberger construed the claim as follows:
"i. Item [A] extends to a complete IBC, i.e. a pallet, a bottle (the "inner container") and a cage (the "outer sleeve");
ii. The claimed inventiveness lies in items [D], [E], and [F], as is indicated by the introductory words "characterised in that";
iii. The inventiveness of the Patent lies in the idea of flexible weld joints in the cage, to increase its strength and durability;
iv. More specifically, the inventiveness lies in the idea of introducing a dimple on either side of the weld and a central raised portion;
v. The description of the Patent acknowledges that the bottle is "exchangeable" – i.e. replaceable."
As both Lord Neuberger and Lord Justice Jacob pointed out in their respective judgments, the photo shown above was not a picture of the patented invention but of a previous version if an IBC made by Sotralentz and Mauser which formed part of the prior art. They had inserted the picture into their judgments to make it easier to understand the issue.

The extent to which the owner of a patented product can repair it by replacing a worn component with a reconditioned part supplied by a third party had been considered by the House of Lords in United Wire Limited v. Screen Repair Services (Scotland) Limited and Another and Others [2000] 4 All ER 353, [2000] UKHL 42. In that case their lordships held that the repair of a patented product is by definition an act which does not amount to making it adding, in Lord Hoffmann's words, that "repair is one of the concepts (like modifying or adapting) which shares a boundary with "making" but does not trespass upon its territory."

The trial judge held that replacing the inner container of a Schütz IBC with a Werit bottle did not amount to making the patented product and suggested the following test:
"the correct approach is to ask whether, when the part in question is removed, what is left embodies the whole of the inventive concept of the claim", and "the inventive concept of [this claim] is wholly embodied in the Schütz cage" 
The Court of Appeal rejected that test.

Before considering United Wire and other authorities Lord Neuberger made the following preliminary observations:
"25. It seems clear that the effect of section 60(1)(a) is that a person infringes a patent for a product if that person 'makes' the product, as claimed in the patent concerned. As to the "making", that is the verb used in section 60(1)(a). As to the product being defined by the claim, that seems clear from section 125(1). In any event, if it is not the product as claimed in the patent, it is hard to see what else the subject matter of the "making" could rationally be.
26,  The word 'makes' must, of course, be interpreted contextually. In this case, the word should, in my view, be approached bearing in mind a number of considerations (which sometimes may be "apparently irreconcilable" in this field, as Robert Walker LJ pointed out in Cartonneries De Thulin SA v CTP White Knight Ltd [2001] RPC 6, para 21 quoting Attorney-General v Prince Ernest Augustus Of Hanover [1957] AC 436, 461). First, the word 'makes' must be given a meaning which, as a matter of ordinary language, it can reasonably bear. Secondly, it is not a term of art: like many English words, it does not have a precise meaning. Thirdly, it will inevitably be a matter of fact and degree in many cases whether an activity involves 'making' an article, or whether it falls short of that.
27. Fourthly, the word 'makes' must be interpreted in a practical way, by reference to the facts of the particular case. Fifthly, however, there is a need for clarity and certainty for patentees and others, and for those advising them. Sixthly, it should be borne in mind that the word applies to patents for all sorts of products, from machinery to chemical compounds. Seventhly, one should bear in mind, at least as part of the background, the need to protect the patentee's monopoly while not stifling reasonable competition.
28.  Eighthly, the word 'makes' must be interpreted bearing in mind that the precise scope of a claim may be a matter almost of happenstance in the context of the question whether the alleged infringer 'makes' the claimed product. Lord Diplock described the specification of a patent as 'a unilateral statement by the patentee, in words of his own choosing' by which he states 'what he claims to be the essential features of the new product' – Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183, 242. As Lord Hoffmann explained in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2004] UKHL 46, [2005] 1 All ER 667, [2005] RPC 169, para 21, a claim is, or at least should be drafted 'not only … in the interest of others who need to know the area 'within which they will be trespassers' but also in the interests of the patentee, who needs to be able to make it clear that he lays no claim to prior art or insufficiently enabled products'. As Lord Hoffmann went on to explain in para 35, all sorts of factors, only some of which may appear to be rational, can influence the person drafting a claim.
29. Ninthly, where, as here, there is a decision (United Wire) of the House of Lords or this court on the meaning of the word, it cannot be departed from save for very good reasons indeed. Finally, particularly given that section 60 (like section 125) is one of the sections mentioned in section 130(7) of the 1977 Act, the word should be interpreted bearing in mind that it is included in a provision which is intended to be part of a scheme which applies in many other jurisdictions."
Lord Neuberger analysed the decisions of the House of Lords and the courts below in United Wire and also decisions of the German courts on what constitutes making a patented article. He concluded at paragraph [50] that:
"The mere fact that an activity involves replacing a constituent part of an article does not mean that the activity involves 'making' of a new article rather than constituting a repair of the original article. Repair of an item frequently involves replacement of one or some of its constituents. If there are broken tiles on a roof, the replacement of those tiles is properly described as repairing the roof, and such replacements could not be said to involve rebuilding, or "making", the roof. Indeed, replacing the whole of a deteriorated roof of a building could be regarded as repairing the building, taken as a whole, rather than reconstructing the building. There are many cases concerned with repairing obligations in leases which illustrate this point - see e.g. the discussion in Woodfall on Landlord and Tenant(October 2008), Vol 1, paras 13.32 to 13.037.12."

The Supreme Court rejected the approaches of both the trial judge and the Court of Appeal in this case.  Though Mr Justice Floyd's test was "attractive and simple to apply" it seemed "to conflict with the wording of sections 60 (1) (a) and 125 (1) as well as with the approach adopted by the Court of Appeal and House of Lords in United Wire"..On the other hand, their lordships thought that the Court of Appeal was too ready to accept that the outcome of this case was governed by United Wire and did not appear to have recognised that the question of whether replacing a part of a patented article constitutes 'making' it was a matter of fact and degree. As they had disagreed with the approaches of both courts the Court offered its his own test at paragraph [61]:
"As is clear from United Wire, this question requires the court to focus on the question of whether, when it replaces a component of the article (viz. the bottle) the subject of the Claim, Delta 'makes' that article (viz. the IBC as described in the Claim). In answering that question, I consider that it is both legitimate and helpful to consider the question of whether the bottle is such a subsidiary part of the patented article that its replacement, when required, does not involve "making" a new article."
Weighing up the various relevant factors, Lord Neuberger on behalf of the Court came to the conclusion at paragraph [77] that by replacing the bottle in the IBC, a third party does not 'make' the article identified in the claim and that Mr. Justice Floyd was right, "albeit for somewhat more nuanced reasons."

The decision between making and mending is an important one and is relevant to other intellectual property rights such as designs and possibly even copyright in the context of computing. This case, which is the second appeal on patents to reach the Supreme Court, has been overshadowed by the decision of the Indian Supreme Court in Novartis but it of far more relevance to British practitioners than the Glivec case. Should anyone want to discuss this case with me he or she can call me on +44 (0)29 7404 5252 or send me a message through my contact form. He or she can also follow me on on Facebook, Linkedin, twitter and Xing.

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