Patents - Cloud Cycle Ltd v Verifi LLC

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Jane Lambert

Intellectual Property Enterprise Court (HH Judge Hacon) Cloud Cycle Ltd v Verifi LLC and another  [2024] EWHC 233 (IPEC) (7 Feb 2024)

In this action and counterclaim Cloud Cycle Ltd ("CCL") is suing Verifi LLC ("Verifi") and GCP Applied Technologies (UK) Limited ("GCP") for a declaration of non-infringement of European Patent (UK) No. 1 720 689 ("the patent") and Verifi and GCP are counterclaiming for infringement of the patent.  Verifi and GCP applied for an interim injunction to restrain CCL from dealing with new customers in an allegedly infringing system for ascertaining the consistency of concrete known as "slump".  CCL responded with an application for summary judgment on its claim and dismissal of the counterclaim.  Both applications came on before His Honour Judge Hacon on 31 Jan 2024.  By para [20] of his judgment in Cloud Cycle Ltd v Verifi LLC and another [2024] EWHC 233 (IPEC) - which he handed down on 7 Feb 2024 - Judge Hacon dismissed the summary judgment application and by para [55] he dismissed the application for interim injunctive relief.  

The Claimant's Summary Judgment Application

The judge referred to para [15] of the judgment of  Mr Justice Lewison in Easyair Ltd v Opal Telecom Ltd.  [2009] EWHC 339 (Ch) and the  Court of Appeal's endorsement at para [24] of Lord Justice Etherton in AC Ward & Sons Ltd v Catlin (Fire) Ltd [2010] Lloyd's Rep IR 301, [2009] EWCA Civ 1098:

"i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91 ;
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."

At para [6] of his judgment, His Honour directed himself that there are further matters to consider which arise where the application is for summary judgment in a patent action which he summarized as follows:

"1) It is frequently not appropriate to grant summary judgment in a patent case because the court must generally consider issues of claim construction and infringement through the eyes of the skilled person. That perception is not possible without the benefit of expert evidence at trial and cross-examination, see Nampak Plastics Europe Ltd v Alpla UK Ltd [2014] EWCA Civ 1293, at [4]-[6] and [9].
(2) Issues arising under the doctrine of equivalents, including identification of the inventive concept, are also liable to require expert evidence, see Shenzhen Carku Technology Co, Ltd v The Noco Company [2020] EWHC 2104 (Pat), at [29] and [75].
(3) However, where the words of the claim which are relevant to the issues of construction and/or infringement arising in a case are susceptible of interpretation according to their ordinary meaning, requiring no expert guidance, summary judgment may be appropriate, particularly where the technology is simple to understand, see Virgin Atlantic Airways Ltd v Delta Airways Inc [2011] EWCA Civ 162 at [13]-[14], cited in Nampak at [7].
(4) A party which argues that the court cannot decide one or more relevant issues without expert evidence must provide sufficient reasons why that is. In Nampak Floyd LJ said at [11]:

'It follows from what I have said that, on a summary judgment application such as this, it is necessary for a party who claims that the court is inadequately equipped to decide an issue of construction to identify, perhaps in only quite general terms, the nature of the evidence of the common general knowledge which he proposes to adduce, and to be in a position to explain why that evidence might reasonably be expected to have an impact on the issue of construction. If that party is not able to do so, it is open to the court to conclude that he is simply hoping that 'something may turn up' and that his defence does not have the necessary 'reality' to avoid summary judgment under Part 24.'

(5) Even in the absence of issues of construction and/or infringement which require expert evidence, the overall principle in an application for summary judgment applies just as much to patent cases as any other, including a simple patent case, namely that where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available and so affect the outcome of the case, summary judgment is not appropriate, see Nampak at [8], citing Khatri v Cooperative Central Raiffeisen-Boerenleenbank BA [2010] EWCA Civ 397 at [6]."

Judge Hacon denied the claimant's summary judgment application for two reasons.  The first was that particulars served pursuant to para 6.1 of the Part 63 Practice Direction contained obscurities that could not be explained without expert evidence which would only be available at trial.  Secondly, in the absence of clear statements by the parties as to the inventive concept of the patented invention, it was impossible to rule out the possibility that the defendants could prove infringement under the doctrine of equivalents.

The Defendants' Interim Injunction Application

The learned judge referred to the principles set out by Lord Diplock in his speech in American Cyanamid Co v Ethicon Ltd [1975] UKHL 1, [1977] FSR 593, [1975] 1 All ER 504, [1975] 2 WLR 316, [1975] AC 396 on the steps for determining whether or not to grant an interim injunction:

"(i) whether there is a serious question to be tried; if so
(ii) whether the claimant could be adequately compensated in damages if it were to succeed at trial; if not
(iii) whether the defendant could be adequately compensated in damages if it were to succeed at trial;
(iv) if the outcome of the balance under (ii) and (iii) is uncertain, where the balance of convenience lies."

His Honour had already decided that there was a serious question to be tried by refusing summary judgment on the claimant's CPR Part 24 application.   The issue boiled down to that stated by Lord Hoffmann in National Commercial Bank Jamaica Ltd v Olint Corpn Ltd (Jamaica) [2009] Bus LR 1110, [2009] UKPC 16, [2009] 1 WLR 1405, [2009] 1 CLC 637, [2009] WLR 1405{

"The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other."

The state of the lists was such that the judge could offer the parties a trial in July and a judgment in September 2024, The period in which one side or the other could suffer "irremediable prejudice" was limited to 7 to 8 months.  Verifi and GCP argued that in the absence of an injunction, GCP would have to reduce its prices, it might not be able to increase its prices again even if Verifi and GCP won at trial, that CCL's system was unproven and GCP's process might suffer reputational damage if it was associated with CCL's and that CCL would be in no position to pay damages under a cross-undertaking,  CCL argued that it was a start-up business with plans for growth and that it was in danger of losing the support of its investors were it to be restrained from pursuing those plans over the next 7 to 8 months.

The judge balanced the competing arguments at para [54] of his judgment;

"The risk to GCP if there is no injunction is there, but not very great and under no circumstances does it represent a threat to GCP's ability to continue in business. The risk to CCL if an injunction is granted is by contrast more likely to be an existential threat, raising the possibility of seriously affecting CCL's ability to trade at a vulnerable stage in its development."

He concluded that the balance favoured no injunction.

Comment

There are two important takeaways from this judgment.

The first is that the test for a triable issue for the purposes of seeking an interim injunction appears to be the same as the test for a real prospect of success for the purpose of CPR Part 24.  Judge Hacon said at para [4] of his judgment:

"In American Cyanamid Co v Ethicon Ltd [1975] AC 396, the threshold test for the grant of an interim injunction was characterised by Lord Diplock as the court being satisfied that "there is serious question to be tried" (at 407) and that the material before the court must disclose that the claimant has "[a] real prospect of succeeding in his claim … at trial" (at 408). These state the same test, see Smith v Inner London Education Authority [1978] 1 All ER 411 (CA) at 419. It implies that the threshold test in American Cyanamid is the same as the test of "no real prospect of succeeding on the claim or issue/successfully defending the claim or issue" in CPR Part 24.3(a). Morris J treated them as the same in Create Financial Management LLP v Lee [2020] EWHC 1933 (QB), at [53], as will I. CCL's application for summary judgment is determinative of the threshold test in the defendants' application for interim relief. "

The other takeaway is that "it is frequently not appropriate to grant summary judgment in a patent case because the court must generally consider issues of claim construction and infringement through the eyes of the skilled person,"  I have addressed that point in detail above,

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