Patents: Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd

"In this case", began Lord Sumption in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46 (3 July 2013).  "Virgin Atlantic Airways Ltd wishes to recover damages exceeding £49,000,000 for the infringement of a European Patent which does not exist in the form said to have been infringed. The Technical Board of Appeal ("TBA") of the European Patent Office ("EPO") has retrospectively amended it so as to remove with effect from the date of grant all the claims said to have been infringed."

The reason why Virgin contended that it was nevertheless entitled to those damages is that the Court of Appeal had held that those same claims were valid and had been infringed, that the questions of validity and infringement were now res judicata and thus not capable of review and that there was authority to that effect from thee Court of Appeal in Coflexip S.A. and another v Stolt Offshore Ms Ltd. and others [2004] EWCA Civ 213 (27 Feb 2004) [2004] FSR 34 and Unilin Beheer BV v Berry Floor NV and others [2008] 1 All ER 156, [2007] Bus LR 1140, [2007] BusLR 1140, [2007] FSR 25, [2007] EWCA Civ 364.

The case before the Supreme Court was not an appeal against the decision of the Court of Appeal that the European patent was valid and had been infringed because permission to appeal to the Supreme Court had already been refused.   It arose in the inquiry as to damages because Zodiac Seats contended that there could be no damages as the claims that were held to have been infringed no longer subsisted.  The outcome depended on "whether the Court of Appeal was right to say that its order declaring the patent to be valid continued to bind the parties per rem judicatam notwithstanding that the patent was later amended on the footing that it was not valid in the relevant respects."

Lord Sumption together with Lady Hale, Lord Clarke and Lord Carnwath sidestepped that question masterfully.   Allowing the appeal Lord Sumption said at paragraph [27]:

"The Court of Appeal decided, before the result of the opposition proceedings in the EPO, that in its unamended form the patent was valid and infringed. It follows that Zodiac are estopped from asserting on the enquiry as to damages that in its unamended form the patent was invalid or was not infringed. This estoppel is a true cause of action estoppel. The Court of Appeal has determined in favour of Virgin issues essential to the existence of the cause of action for infringement of the unamended patent, which are the basis of the claim for damages. However, the point which Zodiac seek to make on the enquiry is that the unamended patent has been retrospectively amended. It no longer exists, and is deemed never to have existed, in the form on which these issues were adjudicated by the Court of Appeal. Zodiac's reliance on the retrospective amendment is a new point which was not raised before. It could not have been raised before, because the decision of the TBA retrospectively amending the patent was made after the order giving effect to the judgment of the Court of Appeal. There are two related reasons why Zodiac cannot be precluded from relying on the decision of the TBA on the enquiry as to damages. One is that they are relying on the more limited terms of a different patent which, by virtue of the decision of the TBA, must at the time of the enquiry be treated as the only one that has ever existed. The other is that Zodiac are not seeking to reopen the question of validity determined by the Court of Appeal. The invalidity of the patent may be the reason why the TBA amended the patent, but the defendant is relying on the mere fact of amendment, not on the reasons why it happened."

That meant that  Coflexip and Unilin had been wrongly decided.

Lord Neuberger also allowed the appeal but for slightly different reasons.   He observed at paragraph [59] that:

"The policy of the Patents Act is that valid patents are enforceable against the world, even if an infringer is honestly and reasonably unaware of the existence of the patent. Equally, if a patent is revoked (or amended), the policy is that the revocation (or amendment) takes effect retrospectively, and that this can be relied on by the world. I find it hard to see why someone who has failed in an attack on the patent should not be entitled, like anyone else, to rely on the points that the patent has been revoked (or amended), and that the revocation (or amendment) is retrospective in its effect, whether in legal proceedings or in another context."

The illogicality of any other conclusion was underscored by the fact that it was common ground that the Court of Appeal's injunction would have to be discharged as an invalid patent could not be infringed in future even if the damages award wase to remain undisturbed.   I have to say that I prefer Lord Neuberger's reasoning on that point to Lord Sumption's,

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