JUDGMENT
Virgin Atlantic Airways Limited (Respondent) v
Zodiac Seats UK Limited (formerly known as
Contour Aerospace Limited) (Appellant)
before
Lord Neuberger, President
Lady Hale
Lord Clarke
Lord Sumption
Lord Carnwath
JUDGMENT GIVEN ON
3 July 2013
Heard on 29 and 30 April 2013
Appellant Respondent
Henry Carr QC Jonathan Crow QC
Iain Purvis QC Richard Meade QC
Brian Nicholson Henry Ward
(Instructed by Wragge & (Instructed by DLA Piper
Co LLP) UK LLP)
LORD SUMPTION (with whom Lady Hale, Lord Clarke and Lord Carnwath
agree)
1. In this case, 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.
2. The TBA found that in the form in which the patent was originally granted
the relevant claims were invalid because they had been anticipated by prior art.
Virgin says that it is nevertheless entitled to recover damages for infringement
because before the TBA had issued its decision, the English courts had held the
patent to be valid and specifically rejected the objection based on prior art. Their
case is that this conclusion and the finding of validity on which it is based are res
judicata notwithstanding the later but retrospective decision of the TBA. A similar
argument had succeeded before the Court of Appeal in very similar circumstances
in Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708 and Unilin Beheer
BV v Berry Floor NV [2007] FSR 635. The Court of Appeal, conceiving itself to
be bound by these decisions and regarding them as correct in principle, arrived at
the same conclusion.
The statutory framework
3. The appeal perfectly illustrates the problems arising from the system of
parallel jurisdiction for determining the validity of European patents.
4. Part II of the Patents Act 1977 gives effect to the principal provisions of the
European Patent Convention. Section 77(1) of the Act provides that a European
Patent (UK), i.e. one which is granted for the United Kingdom or for states
including the United Kingdom, is to be treated as if it were a patent granted under
the Act, and that “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.” Section 77(2)-(4A)
deal with the revocation or amendment of a European Patent by the EPO (“EPO”):
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“77 Effect of European Patent (UK)
…
(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 EPO.
(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 EPO
that the patent is only partially valid,
the provisions of section 63… 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.”
The provisions of section 63 to which section 77(3) refers deal with the power of
the Comptroller in a case where a patent is found to be only partially valid to grant
relief in respect of that part which is found to be valid and infringed.
5. Section 77(2) of the Act refers to “the provisions of the European Patent
Convention relating to the amendment or revocation”. This is a reference to article
68 of the Convention, and indirectly to article 64. They provide:
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“Article 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.
Article 68
Effect of revocation or limitation of the European patent
The European patent application and the resulting European patent
shall be deemed not to have had, from the outset, the effects
specified in articles 64 and 67, to the extent that the patent has been
revoked or limited in opposition, limitation or revocation
proceedings.”
6. Part V of the Convention provides for opposition procedure before the
Opposition Division of the EPO and on appeal from them to the TBA. A European
patent may be opposed on the ground (among others) that the invention is not
patentable by reason of lack of novelty. The procedure is available to any one
affected, provided that it is initiated within nine months of the grant. Under articles
101 and 111 of the Convention, the Opposition Division and the TBA are
empowered to revoke a patent found to be invalid or to accept an amendment
proposed by the patentee which will cause the patent to satisfy the requirements of
the Convention.
7. The effect of these provisions is that the English courts have the same
jurisdiction to determine questions of validity and infringement in the case of a
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European patent as they have for domestic patents, but that concurrent jurisdiction
over questions of validity is exercisable by the EPO. There is, however, an
important difference between the legal effect of a decision in the two jurisdictions.
Both are decisions in rem. They determine the validity of the patent not only as
between the parties to the proceedings, but generally. But the English court’s
jurisdiction over the question of validity is purely national. A decision of an
English court declaring a patent invalid, or (which will normally follow) revoking
it, will have effect in the United Kingdom only, whereas a corresponding decision
of the EPO, which was the authority by which the patent was granted, will have
effect in all the states for which the patent was granted. These considerations make
it highly desirable to avoid inconsistent decisions if it can be done. National
procedures for achieving this differ from one contracting state to another. In
England, there are established procedures for staying English proceedings in which
the validity of a European patent is in issue, if there are concurrent opposition
procedures in the EPO. However the value of these procedures is somewhat
diminished by the current practice of the High Court, which is based on dicta of
Jacob LJ in Unilin Beheer BV v Berry Floor NV [2007] FSR 635, at para 25 and on
the subsequent decision of the Court of Appeal in Glaxo Group Ltd v Genentech
Inc (Practice Note) [2008] Bus LR 888. Their effect is that the primary
consideration on an application for a stay is the probable duration of the
proceedings before the two tribunals. If the question of validity would be likely to
be resolved quicker in the English court than in the EPO, it would normally be
appropriate not to stay the English proceedings. The consequences of this practice
are particularly serious in a case where the English courts “win” the race to
judgment if, as the Court of Appeal decided in Unilin, the effect is to bind the
parties to a decision of the English court that the patent is valid notwithstanding
that the EPO which granted it subsequently decides that it should be revoked or
amended ab initio. In Glaxo Group Ltd v Genentech Inc, at para 83 Mummery LJ,
delivering the judgment of the court thought that this consequence was inherent in
the existence of concurrent systems of adjudication:
“… the possibility of the duplication of proceedings contesting the
validity of a patent granted by the EPO is inherent in the system
established by the Convention. In practice national courts exercise
exclusive jurisdiction on infringement issues and they have
concurrent jurisdiction with the EPO on validity issues. As Mr
Daniel Alexander appearing for the claimant said, the contracting
states and the UK Parliament contemplated that the national patents
courts should be able to determine the same issues of patentability as
the EPO. The resultant legislation allowed the determination by the
national court and the EPO at the same time. Indeed, there is nothing
in the Convention or the 1977 Act to prevent the commencement of
revocation proceedings in the Patents Court on the very date of the
grant of the patent by the EPO.”
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It is undoubtedly right that the draftsmen of both the Convention and the Patents
Act 1977 envisaged concurrent jurisdiction over questions of validity, but it may
be doubted whether they envisaged anything like the consequence which has come
about in this case.
The facts
8. The patent in suit is a European patent for a “seating system and passenger
accommodation unit for a vehicle”, granted to Virgin and published on 30 May
2007. The seat, which was designed in about 2005, reclines to provide a flat bed. It
is commonly used in long-haul aircraft. Zodiac Seats UK Ltd (as it is now called)
manufactures a seating unit called the “Solar Eclipse” in the United Kingdom. It
has been supplied to a number of international airlines. On 30 July 2007, two
months after the grant of the patent, Virgin began proceedings against Zodiac in
the High Court claiming an injunction and damages on the footing that its seats
infringed the patent. Zodiac defended the action on the ground that its seats did not
fall within the claims of the patent. But, they said, if the claims were wide enough
to cover their seats, then the patent was invalid on account of prior art and for
added matter. They also, on 29 February 2008, opposed the validity of the patent
in the EPO, along with a number of airlines who had bought their seats and were at
risk of infringement proceedings if the patent was valid. Initially, no application
was made for a stay of the English proceedings. There was a certain amount of
argument before us about the significance of this fact, if any. For present purposes,
however, it is enough to say that under the Glaxo v Genentech guidelines, an
application for a stay would not necessarily have succeeded.
9. The English action was heard by Lewison J. He gave judgment in January
2009, holding that Zodiac’s “Solar Eclipse” seats did not infringe the patent. He
recorded that if the claims of the patent had been wide enough to cover Zodiac’s
seating system, he would have held it to be invalid for added matter. But he
rejected every other ground of invalidity advanced. Virgin appealed against the
decision on infringement, and Zodiac cross-appealed on validity.
10. On 31 March 2009, some two months after Lewison J’s judgment, the
Opposition Division of the EPO upheld the patent subject to minor amendments
which are agreed to be immaterial to the present dispute. Zodiac and other
opponents of the patent immediately indicated their intention to appeal to the TBA.
This gave rise to a brief correspondence between the parties’ solicitors about what
would happen if the English Court of Appeal held the patent to be valid but the
TBA later held it to be invalid in some relevant respect. Zodiac’s solicitors
proposed that if the appeal on validity succeeded in England, the “making of any
final order” by the Court of Appeal should be stayed until the final determination
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of the opposition proceedings in the EPO. Virgin’s solicitors refused, on their
client’s behalf, to agree. They then wrote on the same day to the Court of Appeal
informing them of the progress and likely course of the opposition proceedings,
and summarising their correspondence with Zodiac’s solicitors. On 12 May 2009,
the Civil Appeals Office replied that “Lord Justice Jacob has directed that he will
not grant a stay of proceedings at present, however, parties can apply for a stay
following judgment in the Court of Appeal if it is still possibly relevant.” That
direction was given without prior notice to either party and without inviting any
observations from those acting for Zodiac.
11. The Appeal was heard in October 2009 by Jacob and Patten LJJ and Kitchin
J. On 22 October, they gave judgment reversing Lewison J’s decision on validity
and holding the patent to have been valid and infringed. They specifically rejected
the argument based on prior art. Zodiac then made the application for a stay of the
order apparently envisaged in Jacob LJ’s direction of 12 May 2009, pending an
application for permission to appeal to the Supreme Court and the conclusion of
the opposition proceedings in the EPO. In a further judgment handed down on 21
December 2009 the Court of Appeal refused the application. The main ground on
which they refused it was that it was pointless to stay the order on the appeal,
because the effect of the decision in Unilin was that any later decision of the TBA
revoking the patent would make no difference. This was because the decision of
the Court of Appeal would bind the parties per rem judicatam. On 12 January 2010
the Court of Appeal sealed an order making a declaration that the patent was valid
and infringed, together with an injunction and an enquiry as to damages. The
injunction was qualified so as to allow the delivery of seats to Delta under an
existing contract, upon Zodiac undertaking to pay £10,000 to Virgin for each seat
delivered, but otherwise covered all future infringements.
12. At this stage, the decision of the TBA on the opposition proceedings was
due to be given on 20 April 2010. In the event, however, this was postponed to 9
September 2010 as a result of the disruption of flights following the eruption of the
Eyjafjalajökull volcano in Iceland. When the adjourned date came, the TBA varied
the decision of the Opposition Division. They held that all the claims found in
England to have been infringed were invalid by reason of prior art, and accepted
amendments proposed by Virgin removing them from the patent. By that time,
however, the appeal proceedings had been completed and permission to appeal on
the merits of the Court of Appeal’s findings had been refused by the Supreme
Court.
13. As a result of this decision, further applications were made by Zodiac to the
Court of Appeal to vary the Court of Appeal’s order and to discharge the
injunction. The injunction was discharged by consent on 1 December 2010. The
application to vary the court’s order was heard by the Court of Appeal (Smith,
Jacob and Patten LJJ) in February 2011. So far as relevant to this appeal, the
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variations actually sought were (i) the replacement of the declarations made by
new declarations making it clear that the patent held to be valid was the
unamended patent; (ii) the discharge of the order for delivery up of the allegedly
infringing articles; (iii) the discharge of the order for an enquiry as to damages;
and (iv) the release of Zodiac from its undertaking to pay £10,000 per seat
delivered to Delta and the repayment of the £3,600,000 already paid under it.
14. Judgment was given on 23 February 2011. The Court of Appeal held
(following the same numbering) (i) that the declaration would not be varied; (ii)
that the order for delivery up would be discharged because it was redundant in the
light of the amendment of the patent; (iii) that the order for an enquiry as to
damages would stand, because it was no more than the mechanism for working out
the effect of the Court of Appeal’s decision that the patent was valid, and that
decision was res judicata; and (iv) that the £3,600,000 was not repayable because it
was an advance referable to (among other things) the damages to be assessed in the
enquiry.
15. To complete the story, on 27 July 2012 Floyd J gave judgment in three
actions against customers who had bought and were using Zodiac’s seating units;
actions to which Zodiac were also joined. They had been sued by Virgin on the
footing that the “Solar Eclipse” seating units infringed the amended patent. Floyd J
held that they did not. His judgment confirms that Zodiac’s seating units do not
infringe the patent in the form which it is now deemed to have taken from the
moment it was granted.
The issue
16. The order of the Court of Appeal of 12 January 2010 upholding the validity
of the patent and directing an enquiry as to damages can now be varied only by
way of appeal, and no further avenues of appeal are open. It is therefore right to
start by pointing out that this is not an appeal against that order. The fundamental
question is whether Zodiac is entitled to contend upon the enquiry as to damages
that there have been no damages because the patent has been retrospectively
amended so as to remove the claims held to have been infringed. This depends 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.
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Res judicata: general principles
17. Res judicata is a portmanteau term which is used to describe a number of
different legal principles with different juridical origins. As with other such
expressions, the label tends to distract attention from the contents of the bottle. The
first principle is that once a cause of action has been held to exist or not to exist,
that outcome may not be challenged by either party in subsequent proceedings.
This is “cause of action estoppel”. It is properly described as a form of estoppel
precluding a party from challenging the same cause of action in subsequent
proceedings. Secondly, there is the principle, which is not easily described as a
species of estoppel, that where the claimant succeeded in the first action and does
not challenge the outcome, he may not bring a second action on the same cause of
action, for example to recover further damages: see Conquer v Boot [1928] 2 KB
336. Third, there is the doctrine of merger, which treats a cause of action as
extinguished once judgment has been given upon it, and the claimant’s sole right
as being a right upon the judgment. Although this produces the same effect as the
second principle, it is in reality a substantive rule about the legal effect of an
English judgment, which is regarded as “of a higher nature” and therefore as
superseding the underlying cause of action: see King v Hoare (1844) 13 M & W
494, 504 (Parke B). At common law, it did not apply to foreign judgments,
although every other principle of res judicata does. However, a corresponding rule
has applied by statute to foreign judgments since 1982: see Civil Jurisdiction and
Judgments Act 1982, section 34. Fourth, there is the principle that even where the
cause of action is not the same in the later action as it was in the earlier one, some
issue which is necessarily common to both was decided on the earlier occasion and
is binding on the parties: Duchess of Kingston’s Case (1776) 20 St Tr 355. “Issue
estoppel” was the expression devised to describe this principle by Higgins J in
Hoysted v Federal Commissioner of Taxation (1921) 29 CLR 537, 561 and
adopted by Diplock LJ in Thoday v Thoday [1964] P 181, 197-198. Fifth, there is
the principle first formulated by Wigram V-C in Henderson v Henderson (1843) 3
Hare 100, 115, which precludes a party from raising in subsequent proceedings
matters which were not, but could and should have been raised in the earlier ones.
Finally, there is the more general procedural rule against abusive proceedings,
which may be regarded as the policy underlying all of the above principles with
the possible exception of the doctrine of merger.
18. It is only in relatively recent times that the courts have endeavoured to
impose some coherent scheme on these disparate areas of law. The starting point is
the statement of principle of Wigram V-C in Henderson v Henderson (1843) 3
Hare 100, 115. This was an action by the former business partner of a deceased for
an account of sums due to him by the estate. There had previously been similar
proceedings between the same parties in Newfoundland in which an account had
been ordered and taken, and judgment given for sums found due to the estate. The
personal representative and the next of kin applied for an injunction to restrain the
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proceedings, raising what would now be called cause of action estoppel. The issue
was whether the partner could reopen the matter in England by proving
transactions not before the Newfoundland court when it took its own account. The
Vice-Chancellor said:
“In trying this question I believe I state the rule of the Court
correctly when I say that, where a given matter becomes the subject
of litigation in, and of adjudication by, a Court of competent
jurisdiction, the Court requires the parties to that litigation to bring
forward their whole case, and will not (except under special
circumstances) permit the same parties to open the same subject of
litigation in respect of matter which might have been brought
forward as part of the subject in contest, but which was not brought
forward, only because they have, from negligence, inadvertence, or
even accident, omitted part of their case. The plea of res judicata
applies, except in special cases, not only to points upon which the
Court was actually required by the parties to form an opinion and
pronounce a judgment, but to every point which properly belonged
to the subject of litigation, and which the parties, exercising
reasonable diligence, might have brought forward at the time… Now,
undoubtedly the whole of the case made by this bill might have been
adjudicated upon in the suit in Newfoundland, for it was of the very
substance of the case there, and prima facie, therefore, the whole is
settled. The question then is whether the special circumstances
appearing upon the face of this bill are sufficient to take the case out
of the operation of the general rule.”
19. Wigram V-C’s statement of the law is now justly celebrated. The principle
which he articulated is probably the commonest form of res judicata to come
before the English courts. For many years, however, it was rarely invoked. The
modern law on the subject really begins with the adoption of Wigram V-C’s
statement of principle by the Privy Council in Yat Tung Investment Co Ltd v Dao
Heng Bank Ltd [1975] AC 581. Yat Tung was an appeal from Hong Kong, in
which the appellant sought to unsuccessfully avoid the exercise by a mortgagee of
a power of sale in two successive actions, contending on the first occasion that the
sale was a sham and that there was no real sale, and on the second that the sale was
fraudulent. Lord Kilbrandon, giving the advice of the Board, distinguished at 589
590 between res judicata and abuse of process:
“The second question depends on the application of a doctrine of
estoppel, namely res judicata. Their Lordships agree with the view
expressed by McMullin J that the true doctrine in its narrower sense
cannot be discerned in the present series of actions, since there has
not been, in the decision in no. 969, any formal repudiation of the
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pleas raised by the appellant in no. 534. Nor was Choi Kee, a party
to no. 534, a party to no. 969. But there is a wider sense in which the
doctrine may be appealed to, so that it becomes an abuse of process
to raise in subsequent proceedings matters which could and therefore
should have been litigated in earlier proceedings.”
Lord Kilbrandon referred to the statement of Wigram V-C in Henderson v
Henderson as the authority for the “wider sense” of res judicata, classifying it as
part of the law relating to abuse of process.
20. The implications of the principle stated in Henderson v Henderson were
more fully examined by the House of Lords in Arnold v National Westminster
Bank plc [1991] 2 AC 93. The question at issue in that case was whether in
operating a rent review clause under a lease, the tenants were bound by the
construction given to the very same clause by Walton J in earlier litigation
between the same parties over the previous rent review. The Court of Appeal had
subsequently, in other cases, cast doubt on Walton J’s construction, and the House
approached the matter on the footing that the law (or perhaps, strictly speaking, the
perception of the law) had changed since the earlier litigation. Lord Keith of
Kinkel began his analysis by restating the classic distinction between cause of
action estoppel and issue estoppel:
“Cause of action estoppel arises where the cause of action in the later
proceedings is identical to that in the earlier proceedings, the latter
having been between the same parties or their privies and having
involved the same subject matter. In such a case the bar is absolute in
relation to all points decided unless fraud or collusion is alleged,
such as to justify setting aside the earlier judgment. The discovery of
new factual matter which could not have been found out by
reasonable diligence for use in the earlier proceedings does not,
according to the law of England, permit the latter to be re-opened.
(104D-E)
Issue estoppel may arise where a particular issue forming a necessary
ingredient in a cause of action has been litigated and decided and in
subsequent proceedings between the same parties involving a
different cause of action to which the same issue is relevant one of
the parties seeks to re-open that issue.” (105E)
The case before the committee was treated as one of issue estoppel, because the
cause of action was concerned with a different rent review from the one considered
by Walton J. But it is important to appreciate that the critical distinction in Arnold
was not between issue estoppel and cause of action estoppel, but between a case
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where the relevant point had been considered and decided in the earlier occasion
and a case where it had not been considered and decided but arguably should have
been. The tenant in Arnold had not failed to bring his whole case forward before
Walton J. On the contrary, he had argued the very point which he now wished to
reopen and had lost. It was not therefore a Henderson v Henderson case. The real
issue was whether the flexibility in the doctrine of res judicata which was implicit
in Wigram V-C’s statement extended to an attempt to reopen the very same point
in materially altered circumstances. Lord Keith of Kinkel, with whom the rest of
the Committee agreed, held that it did.
21. Lord Keith first considered the principle stated by Wigram V-C that res
judicata extended to “every point which properly belonged to the subject of
litigation and which the parties exercising reasonable diligence might have brought
forward at the time.” He regarded this principle as applying to both cause of action
estoppel and issue estoppel. Cause of action estoppel, as he had pointed out, was
“absolute in relation to all points decided unless fraud or collusion is alleged”. But
in relation to points not decided in the earlier litigation, Henderson v Henderson
opened up
“the possibility that cause of action estoppel may not apply in its full
rigour where the earlier decision did not in terms decide, because
they were not raised, points which might have been vital to the
existence or non-existence of a cause of action” (105B).
He considered that in a case where the earlier decision had decided the relevant
point, the result differed as between cause of action estoppel and issue estoppel:
“There is room for the view that the underlying principles upon
which estoppel is based, public policy and justice, have greater force
in cause of action estoppel, the subject matter of the two
proceedings being identical, than they do in issue estoppel, where the
subject matter is different.” (108G-H)
The relevant difference between the two was that in the case of cause of action
estoppel it was in principle possible to challenge the previous decision as to the
existence or non-existence of the cause of action by taking a new point which
could not reasonably have been taken on the earlier occasion; whereas in the case
of issue estoppel it was in principle possible to challenge the previous decision on
the relevant issue not just by taking a new point which could not reasonably have
been taken on the earlier occasion but to reargue in materially altered
circumstances an old point which had previously been rejected. He formulated the
latter exception at 109B as follows:
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“In my opinion your Lordships should affirm it to be the law that
there may be an exception to issue estoppel in the special
circumstance that there has become available to a party further
material relevant to the correct determination of a point involved in
the earlier proceedings, whether or not that point was specifically
raised and decided, being material which could not by reasonable
diligence have been adduced in those proceedings. One of the
purposes of estoppel being to work justice between the parties, it is
open to courts to recognise that in special circumstances inflexible
application of it may have the opposite result.”
This enabled the House to conclude that the rejection of Walton J’s construction of
the rent review clause in the subsequent case-law was a materially altered
circumstance which warranted rearguing the very point that he had rejected.
22. Arnold is accordingly authority for the following propositions:
(1) Cause of action estoppel is absolute in relation to all points which had to
be and were decided in order to establish the existence or non-existence
of a cause of action.
(2) Cause of action estoppel also bars the raising in subsequent proceedings
of points essential to the existence or non-existence of a cause of action
which were not decided because they were not raised in the earlier
proceedings, if they could with reasonable diligence and should in all the
circumstances have been raised.
(3) Except in special circumstances where this would cause injustice, issue
estoppel bars the raising in subsequent proceedings of points which (i)
were not raised in the earlier proceedings or (ii) were raised but
unsuccessfully. If the relevant point was not raised, the bar will usually
be absolute if it could with reasonable diligence and should in all the
circumstances have been raised.
23. It was submitted to us on behalf of Virgin that recent case-law has recategorised the principle in Henderson v Henderson so as to treat it as being
concerned with abuse of process and to take it out of the domain of res judicata
altogether. In these circumstances, it is said, the basis on which Lord Keith
qualified the absolute character of res judicata in Arnold v National Westminster
Bank by reference to that principle is no longer available, and his conclusions can
no longer be said to represent the law.
Page 13
24. I do not accept this. The principle in Henderson v Henderson has always
been thought to be directed against the abuse of process involved in seeking to
raise in subsequent litigation points which could and should have been raised
before. There was nothing controversial or new about this notion when it was
expressed by Lord Kilbrandon in Yat Tung. The point has been taken up in a large
number of subsequent decisions, but for present purposes it is enough to refer to
the most important of them, Johnson v Gore-Wood & Co [2002] 2 AC 1, in which
the House of Lords considered their effect. This appeal arose out of an application
to strike out proceedings on the ground that the plaintiff’s claim should have been
made in an earlier action on the same subject-matter brought by a company under
his control. Lord Bingham took up the earlier suggestion of Lord Hailsham of St.
Marylebone LC in Vervaeke v Smith [1983] 1 AC 145, 157 that that the principle
in Henderson v Henderson was “both a rule of public policy and an application of
the law of res judicata”. He expressed his own view of the relationship between the
two at p 31 as follows:
“Henderson v Henderson abuse of process, as now understood,
although separate and distinct from cause of action estoppel and
issue estoppel, has much in common with them. The underlying
public interest is the same: that there should be finality in litigation
and that a party should not be twice vexed in the same matter. This
public interest is reinforced by the current emphasis on efficiency
and economy in the conduct of litigation, in the interests of the
parties and the public as a whole. The bringing of a claim or the
raising of a defence in later proceedings may, without more, amount
to abuse if the court is satisfied (the onus being on the party alleging
abuse) that the claim or defence should have been raised in the
earlier proceedings if it was to be raised at all. I would not accept
that it is necessary, before abuse may be found, to identify any
additional element such as a collateral attack on a previous decision
or some dishonesty, but where those elements are present the later
proceedings will be much more obviously abusive, and there will
rarely be a finding of abuse unless the later proceeding involves what
the court regards as unjust harassment of a party. It is, however,
wrong to hold that because a matter could have been raised in earlier
proceedings it should have been, so as to render the raising of it in
later proceedings necessarily abusive. That is to adopt too dogmatic
an approach to what should in my opinion be a broad, merits-based
judgment which takes account of the public and private interests
involved and also takes account of all the facts of the case, focusing
attention on the crucial question whether, in all the circumstances, a
party is misusing or abusing the process of the court by seeking to
raise before it the issue which could have been raised before.”
Page 14
The rest of the Committee, apart from Lord Millett, agreed in terms with Lord
Bingham’s speech on this issue. Lord Millett agreed in substance in a concurring
speech. He dealt with the relationship between res judicata and the Henderson v
Henderson principle at pp 58H-59B as follows:
“Later decisions have doubted the correctness of treating the
principle as an application of the doctrine of res judicata, while
describing it as an extension of the doctrine or analogous to it. In
Barrow v Bankside Members Agency Ltd [1996] 1 WLR 257, Sir
Thomas Bingham MR explained that it is not based on the doctrine
in a narrow sense, nor on the strict doctrines of issue or cause of
action estoppel. As May LJ observed in Manson v Vooght [1999]
BPIR 376, 387, it is not concerned with cases where a court has
decided the matter, but rather cases where the court has not decided
the matter. But these various defences are all designed to serve the
same purpose: to bring finality to litigation and avoid the oppression
of subjecting a defendant unnecessarily to successive actions. While
the exact relationship between the principle expounded by Sir James
Wigram V-C and the defences of res judicata and cause of action and
issue estoppel may be obscure, I am inclined to regard it as primarily
an ancillary and salutary principle necessary to protect the integrity
of those defences and prevent them from being deliberately or
inadvertently circumvented.”
25. It was clearly not the view of Lord Millett in Johnson v Gore-Wood that
because the principle in Henderson v Henderson was concerned with abuse of
process it could not also be part of the law of res judicata. Nor is there anything to
support that idea in the speech of Lord Bingham. The focus in Johnson v GoreWood was inevitably on abuse of process because the parties to the two actions
were different, and neither issue estoppel nor cause of action estoppel could
therefore run (Mr Johnson’s counsel conceded that he and his company were
privies, but Lord Millett seems to have doubted the correctness of the concession
at p 60D-E, and so do I). Res judicata and abuse of process are juridically very
different. Res judicata is a rule of substantive law, while abuse of process is a
concept which informs the exercise of the court’s procedural powers. In my view,
they are distinct although overlapping legal principles with the common
underlying purpose of limiting abusive and duplicative litigation. That purpose
makes it necessary to qualify the absolute character of both cause of action
estoppel and issue estoppel where the conduct is not abusive. As Lord Keith put it
in Arnold v National Westminster Bank at p 110G, “estoppel per rem judicatam,
whether cause of action estoppel, or issue estoppel is essentially concerned with
preventing abuse of process.”
Page 15
26. It may be said that if this is the principle it should apply equally to the one
area hitherto regarded as absolute, namely cases of cause of action estoppel where
it is sought to reargue a point which was raised and rejected on the earlier
occasion. But this point was addressed in Arnold, and to my mind the distinction
made by Lord Keith remains a compelling one. Where the existence or nonexistence of a cause of action has been decided in earlier proceedings, to allow a
direct challenge to the outcome, even in changed circumstances and with material
not available before, offends the core policy against the re-litigation of identical
claims.
Application to the present case
27. If this case is to be determined according to these general principles of the
modern law, there can, I think, be little doubt about the answer. 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.
The patent cases
28. How then did the Court of Appeal come to a different conclusion? The
answer is that they followed a line of cases culminating in the decision of the
Court of Appeal in Unilin Beheer BV v Berry Floor NV [2007] FSR 635, which
had held that a patentee whose patent has been held to be valid is entitled to claim
damages for its infringement without regard to a subsequent revocation of the
Page 16
patent. This has been held to be so, even though it has always been the law in
England (as it is under the European Patent Convention) that the revocation of a
patent for invalidity relates back to the date of grant: see, currently, section 75(3)
of the Patents Act 1977.
29. The decisions which support the Court of Appeal’s conclusion are Poulton
v Adjustable Cover and Boiler Block Co [1908] 2 Ch 430, Coflexip SA v Stolt
Offshore MS Ltd (No 2) [2004] FSR 708 and Unilin itself.
30. The facts in Poulton were that the court had held the patent to be valid and
infringed and had ordered an enquiry as to damages. An attempt to have the patent
declared invalid for prior use had been rejected. After the judgment, the defendant
found a further and better instance of prior use on the basis of which he
successfully petitioned for the revocation of the patent. He then sought to rely on
the revocation on the enquiry as to damages. The question presently before this
court was not argued. The defendant’s case was that the revocation of the patent
was a decision in rem which itself gave rise to an estoppel against the world. There
was therefore, it was said, “an estoppel against an estoppel”. Parker J rejected this
argument. The Court of Appeal (Vaughan Williams, Fletcher Moulton and
Buckley LJJ) also rejected it in an extempore judgment delivered on a Friday
afternoon after an argument in which no authority was cited on the ambit of the
law of res judicata other than the Duchess of Kingston’s Case (1776) 20 St Tr 355.
Vaughan Williams LJ appears to have thought that the revocation of the patent
operated only from the date it occurred, but he held that it did not matter whether
the patent was valid or not, nor whether the revocation was retrospective. This was
because the Court having declared it to be valid, it must be treated as valid as
between the same parties notwithstanding its subsequent revocation. Fletcher
Moulton LJ considered that it was enough that the patent had been declared to be a
valid patent at the time of the judgment. That was determinative on an enquiry as
to damages in the same proceedings. Buckley LJ did not “feel so clear on this point
as my learned brothers”, but considered that their view could be justified on the
footing that the enquiry as to damages was no more than the working out of the
effect of the judgment on liability. The decision may have been in accord with the
law of res judicata as it was then thought to be, before the implications of
Henderson v Henderson were appreciated or the doctrine had acquired its modern
flexibility. What is clear is that without special facts the grounds on which Poulton
was decided cannot be reconciled with the modern law on the subject.
31. The real origin of the principle applied by the Court of Appeal in the
present case was a much more recent case, namely the decision of the Court of
Appeal in Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708. The patent
in this case related to a system for laying flexible flowlines in the seabed in subsea
oil installations. The facts were substantially the same as in Poulton. The court had
rejected a challenge to the validity of the patent based on prior art, and had held
Page 17
that the only infringement alleged in the pleadings (relating to the performance of
a contract for the Magnus Swift field) was made out. The court gave judgment for
the patentee, ordering an enquiry as to damages. In accordance with the ordinary
practice, the enquiry as to damages extended not just to the Magnus Swift field
infringement but to fourteen other similar infringements. While it was in progress
a third party, relying upon different prior art in parallel proceedings, succeeded in
having the patent revoked. The majority of the Court of Appeal (Peter Gibson LJ
and Sir Martin Nourse) held that they were bound by Poulton and that the
defendant was estopped. They rejected the submission that it was no longer good
law, for two reasons. The first was based on Lord Keith’s distinction in Arnold
between cause of action estoppel and issue estoppel. The second was that unless
the defendant was estopped, the patentee would be harassed by two successive
proceedings in which he would be required to defend the validity of the patent.
Neuberger LJ dissented. He distinguished between “strict cause of action estoppel”
(i.e. where the same issue had been decided in the earlier proceedings) and “abuse
of process cause of action estoppel” (where the unsuccessful party wishes to
reargue the point by reference to new material or a new argument not put before
the court before). Neuberger LJ assigned the Magnus Swift field infringement to
the second category of cause of action estoppel, because the defendant was seeking
to rely not on the prior art which had led to the revocation of the patent in the
parallel proceedings, but on the mere fact of revocation, which was a decision in
rem, and decisive irrespective of the ground for it. He regarded the fourteen other
alleged infringements raised only on the enquiry as being governed by the
principles relating to issue estoppel. He considered that the estoppel was not
absolute in either case.
32. In my opinion the majority in Coflexip were mistaken on both of the points
which they made, for substantially the reasons given by Neuberger LJ in his
dissenting judgment. The point can best be tested by reference to the Magnus Swift
field infringement, which unquestionably turned on cause of action estoppel. I
would for my part leave open the question whether the same applied to the other
fourteen infringements, which has given rise to a certain amount of controversy
since: see Hormel Foods Corp v Antilles Landscape Investments NV [2005] RPC
657, Unilin Beheer BV v Berry Floor NV [2007] FSR 635 at paras 47-48. The
essential fallacy in the majority’s reasoning in Coflexip lay in their view that Lord
Keith in Arnold had held that cause of action estoppel was always absolute. He did
not. He held that it was absolute only in relation to points actually decided on the
earlier occasion. Because of this mistake, the majority had no regard to the fact
that the consequences of the patent’s revocation had not been decided on the
earlier occasion, and could not have been because it had not happened. As for the
policy considerations, they were also wrong, as it seems to me, to suppose that the
court would be rehearing on the enquiry the question of validity decided by the
judgment on liability. The revocation of the patent was an act in rem which
determined the status of the patent as against the world. It had been revoked by the
authority which had granted it and must be treated as never having existed.
Page 18
Although the patent had been revoked on the ground of invalidity, the issue which
the defendant wished to raise on the enquiry was not invalidity but revocation. The
revocation would be decisive regardless of the ground on which it was ordered.
33. In Unilin Beheer BV v Berry Floor NV [2007] FSR 635 the Court of Appeal
reached the same conclusion. The facts were in some ways an even more exacting
test of the principle, because the policy considerations invoked in Coflexip could
not possibly have justified the outcome in Unilin. This was because, as in the
present case, the patent was retrospectively amended by the EPO to limit its scope
to valid claims, after the English court had given judgment in favour of the
patentee. The “vexation” associated with the pursuit of two proceedings
challenging the validity of the patent was an inescapable feature of the statutory
scheme which conferred concurrent jurisdiction on questions of validity on both
the English court and the EPO. It can hardly be said that the vexation inherent in
there being two perfectly proper proceedings concurrently is made more tolerable
by ignoring the outcome of one of them. It was common ground in Unilin that the
court was bound by Coflexip, and there was therefore only limited consideration of
the merits of the principle decided in that case. The argument was directed to a
different issue, namely whether the law stated in Coflexip was inconsistent with
the scheme of the legislation relating to European patents, and therefore impliedly
excluded where such a patent was revoked or amended by the EPO.
34. In his judgment in Unilin, Jacob LJ said that he was “not sorry” to reach the
conclusion that he did: (i) it was conducive to certainty because it enabled the
parties to get a final decision on validity from an English court without waiting “to
find out who has won until the slowest horse in the race gets there”; and (ii) any
injunction against future infringements will be discharged if the EPO subsequently
revokes or amends the patent. I have to say that I do not find either of these
considerations convincing. Jacob LJ plainly assumed that the “slowest horse”
would usually be the EPO. That assumption was not necessarily correct, especially
in the light of the availability of at least one and potentially two tiers of appeal in
England. The truth is that the effect of the decision in Coflexip is not to introduce
certainty in this field but to make the outcome dependent on the wholly
adventitious question which of two concurrently competent jurisdictions completes
its procedures first. In the present case, the Court of Appeal may have reached a
different conclusion if the Opposition Division of the EPO had reached the
conclusion subsequently reached by the TBA. Permission to appeal the decision on
validity to this court might well have been granted if the eruption of the Icelandic
volcano had not deferred the decision of the TBA to a date after the application for
permission had been resolved. The fate of £49m must surely depend on more
substantial and predictable considerations than these. As for the discharge of any
injunction restraining future infringements, this was a point also made by the
majority in Coflexip (see para 137), but to my mind it simply underlines the
irrationality of their conclusion. Logically, if the defendant is bound by the court’s
Page 19
declaration that the patent is valid although it has been revoked or amended, he
should be equally bound whether the remedy sought is damages or an injunction.
The distinction between past and future infringements makes no sense in a case
where a single cause of action embraces both and the revocation or amendment is
by statute effective ab initio.
35. In my opinion Poulton is no longer good law, and Coflexip was wrongly
decided. It follows that Unilin was also wrongly decided because it proceeded on
the premise of the law stated in Coflexip. The point with which Unilin was
actually concerned, namely whether there is a different rule for European patents
arising from the scheme of the relevant legislation, has been argued before us but it
does not arise, because the anomaly in English law to which that point is directed
does not exist. Accordingly, where judgment is given in an English court that a
patent (whether English or European) is valid and infringed, and the patent is
subsequently retrospectively revoked or amended (whether in England or at the
EPO), the defendant is entitled to rely on the revocation or amendment on the
enquiry as to damages.
36. Once the enquiry is concluded, different considerations will arise. There
will then be a final judgment for a liquidated sum. At common law, that judgment
could be challenged on the ground that the patent had later been revoked or
amended only by way of appeal, and then only if an appeal is still open. I doubt
whether an implied statutory right to reopen it could be derived from the scheme of
the Patents Act 1977, but that is a question which will have to await a case in
which it arises.
Disposal
37. I would allow the appeal and declare that Zodiac are entitled to rely on the
amendment of Virgin’s patent in answer to their claim for damages on the enquiry.
The Glaxo v Genentech guidelines
38. I add a brief observation on the procedural implications. If I had concluded
that the defendant was estopped from relying on the revocation or amendment of
the patent once the court had adjudged it to be valid, that would have had
important implications for the question whether English proceedings should be
stayed pending a decision in concurrent opposition proceedings in the EPO. On
that footing, it would in my opinion have been essential to stay the English
proceedings so that the decision of the EPO would not be rendered nugatory by the
operation of the law of res judicata. On that hypothesis, it would have been
Page 20
difficult to defend the guidance given by the Court of Appeal in Glaxo Group Ltd
v Genentech Inc [2008] Bus LR 888 to the effect that the English court should
normally refuse a stay of its own proceedings if it would be likely to resolve the
question of validity significantly earlier. The effect of that guidance is to put more
litigants in the impossible situation in which successive decisions of the Court of
Appeal placed the parties in this case. As it is, the problem has not gone away,
even on the footing that those decisions are overruled. In the first place, a similar
problem may well arise if the patent is revoked by the EPO after a judgment has
been given for a liquidated sum. Second, that problem is aggravated by the fact
that a decision of the English court on validity is directly effective only in the
United Kingdom, whereas the EPO’s decision, being the decision of the authority
which granted the patent, is directly effective in every country for which the patent
was granted. Third, even if the EPO opposition proceedings are concluded in time
to affect the English proceedings, the uncertainty and waste of costs involved do
little credit to our procedures. This is not a suitable occasion, nor is the Supreme
Court the appropriate tribunal to review the guidelines, but I think that they should
be re-examined by the Patents Court and the Court of Appeal.
LORD NEUBERGER (with whom Lady Hale, Lord Clarke and Lord
Carnwath agree)
The factual background
39. The facts of this case are fully set out by Lord Sumption in paras 8-15 of his
judgment, but it is worth summarising them. Virgin was the registered proprietor
of a European patent (UK) (“the Patent”) granted out of the European Patent
Office (“EPO”). They began infringement proceedings (“the English
proceedings”) in the High Court against Zodiac, who were manufacturing and
selling an allegedly infringing product. Zodiac denied infringement, and
counterclaimed for revocation of the Patent on the grounds, inter alia, that it was
invalid in the light of prior art. Those proceedings resulted in a hearing in front of
the Court of Appeal, which (i) decided that the Patent was valid, (ii) declared that
Zodiac’s product infringed it, and (iii) ordered an assessment of damages (“the
assessment”) – [2009] EWCA Civ 1062 and 1513.
40. Meanwhile, opposition proceedings in the EPO had been initiated by
Zodiac in respect of the Patent. Following the decision of the Court of Appeal in
the English proceedings, the opposition proceedings came before the Technical
Board of Appeal (“TBA”). During the course of the hearing before the TBA,
Virgin abandoned the claims which Zodiac had been held to infringe, and the
Patent was amended accordingly. Virgin then contended that Zodiac’s product
infringed one or more of the surviving claims of the Patent, as amended, but Floyd
Page 21
J concluded that the amendment limited the scope of the Patent so as to render
Zodiac’s product no longer infringing – [2012] EWHC 2153 (Pat). It is common
ground that the consequence of this is that the Patent is to be treated as limited in
its scope pursuant to the amendment, with retrospective effect from its priority
date.
41. Virgin contend that, because the English proceedings have been finally
determined in their favour on validity and infringement, it is not now open to
Zodiac to rely in the assessment on the subsequent amendment of the Patent, by
virtue of res judicata. In other words, Virgin’s contention is that the assessment
should proceed on the basis that Zodiac are precluded from contending that they
are not liable for any damages for infringement in the light of the amendment of
the Patent. If that contention is right, then it seems likely that Virgin will recover
damages probably running to tens of millions of pounds, whereas if it is wrong,
they will presumably recover nothing.
Res judicata and the authorities on the point in this appeal
42. In paras 17-26 of his judgment, Lord Sumption summarises the law in
relation to res judicata, and I agree with his exposition.
43. Virgin’s contention is that res judicata compels the conclusion that, where a
patent has been held by a court to be valid and infringed as between the patentee
and an alleged infringer, but it is subsequently revoked (or amended so that the
alleged infringer would no longer be held to infringe), the patentee is nonetheless
entitled to damages from the alleged infringer as if the patent had not been revoked
(or relevantly amended). This contention receives support from three previous
decisions of the Court of Appeal, which were followed by the Court of Appeal in
this case. Those decisions are Poulton v Adjustable Cover and Boiler Block Co
[1908] 2 Ch 430, Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708, and
Unilin Beheer BV v Berry Floor NV [2007] FSR 635.
44. Poulton and Coflexip both involved an assessment of damages following a
hearing at which the alleged infringer had unsuccessfully challenged the patentee
on the validity and infringement of a purely British patent, in the English courts,
but, before the assessment of damages had taken place, the patent had been
revoked in other proceedings which were also in the English courts. The present
case, like Unilin, is concerned with a European patent, in respect of which issues
of validity and infringement have been determined by the English courts, but,
before the assessment of damages has taken place, validity is being, or has been,
considered by the EPO in opposition proceedings.
Page 22
45. In Poulton [1908] 2 Ch 430, 437, Vaughan Williams LJ explained that the
judgment obtained by the patentee “made the question whether there had been an
infringement … of a patent then valid … res judicata as between the parties to the
action, and operated as a complete estoppel between them”. On the following
page, he said that the subsequent “order of revocation … could not affect the
already existing estoppel, by virtue of which the defendants were prevented from
denying that which … had been finally determined to be the truth of the matter as
between [the] parties … involved in [the] action”, and he therefore concluded that
the alleged infringer could not rely on the subsequent revocation of the patent on
the assessment of damages.
46. At first sight, one can see the force of that reasoning. It is well established
that the fact that an identical issue is determined differently in two different sets of
proceedings is irrelevant to the rights of the parties to each set of proceedings inter
se. Thus, in the normal run of things, where A has lost against B on an issue in one
case, it is simply irrelevant to A’s legal obligations and rights as against B if C
subsequently defeats B on the very same issue (except it may help A to obtain
permission to appeal out of time – see Arnold v National Westminster Bank plc
[1991] 2 AC 93, 109F-110C – but that is rather a different matter). That is because
the determination of most issues in litigation can only bind the parties to the
litigation (and their privies).
47. The point is starkly illustrated by In re Waring, Westminster Bank v BurtonButler [1948] Ch 221. In that case, Jenkins J held that (i) an annuitant under a will
was bound by a decision of the Court of Appeal in earlier litigation, where the will
trustees and he were parties, as to the effect of tax legislation on his rights, but (ii)
another annuitant was entitled to rely on a subsequent, more favourable, decision
of the House of Lords on the point in a different case, because he had not been a
party to the earlier litigation. Whilst Jenkins J acknowledged that the result may
appear to be “anomalous”, in reality it was a clear and principled application of the
fundamental rule.
Discussion
48. In my view, however, the same cannot be said of the reasoning of the Court
of Appeal in Poulton [1908] 2 Ch 430, and in the three cases which followed it
(including this case). It seems to me that the mistake of the courts in those four
decisions was attributable to the fact that they did not have appropriate regard to
the statutory provisions relating to patents, which reflect the nature of a patent and
the effect of its revocation. They therefore treated the subsequent decision to
revoke the patent as no more than a later determination by another court in other
proceedings between different parties.
Page 23
49. The essential point is that, although the decision to revoke the patent was
indeed made in proceedings involving different parties, the effect of the Patents
Act 1977 (and its statutory predecessors) (“the Patents Act”) and the European
Patent Convention (“the EPC”) whose relevant provisions are set out in paras 3-7
of Lord Sumption’s judgment, was that the revocation did not just have effect
between those parties. The revocation of the patent deprived the patentee of the
rights which the patent had bestowed on him as against the world; furthermore, it
did so retrospectively. In other words, the effect of the revocation was that
everyone was entitled to conduct their affairs as if the patent had never existed.
50. The failure to consider the nature of a patent and the effect of its revocation
led the Court of Appeal into error, as it failed to take into account the fact that the
issue of res judicata was being raised by the (former) patentee in connection with a
particular statutory right. In this connection, it is worth referring to an observation
of Lord Bridge in Thrasyvoulou v Secretary of State for the Environment [1990] 2
AC 273, 289C-D:
“In relation to adjudications subject to a comprehensive selfcontained statutory code, the presumption … 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 the principle can properly be inferred as a matter
of construction of the relevant statutory provisions.”
I do not suggest that the Patents Act or the EPC “created a specific jurisdiction”,
but the observation emphasises that an issue of res judicata in connection with a
patent case cannot be considered correctly without proper regard to the effect of
that Act and the EPC.
51. In Poulton [1908] 2 Ch 430 and the cases which followed it, the Court of
Appeal failed to focus on the point that the effect of the Patents Act was that the
revocation meant that, as against the world, the patentee had never had a valid
patent. They wrongly concluded that cause of action estoppel applied so as to
preclude the alleged infringer from relying on the revocation of the patent in the
assessment, because they failed correctly to formulate the point which the alleged
infringer wished to take on the assessment. The alleged infringer was bound by
strict cause of action estoppel from running any argument that it had run on
validity or infringement, but there was no such strict rule to prevent it from
contending that the patent had, as a matter of fact, been revoked. Not merely was
that an argument which had not been run in the earlier proceedings: it was an
argument which, ex hypothesi, could not have been run in the earlier proceedings.
Accordingly, following the reasoning in Arnold, it was a fact which the court could
Page 24
at least have contemplated permitting the alleged infringer to rely on in the
assessment.
52. In my view, however, it goes further than that. Absent special factors,
principle, fairness and commercial sense support the view that the fact that the
patent in issue had been revoked was a point which the alleged infringer should
have been entitled to rely on in the assessment. It was a new, centrally important,
uncontroversial fact, and to deny the alleged infringer the ability to raise it would
be to give effect to a monopoly right which the patentee never should have had.
Further, while not enough of a point on its own, it can fairly be said that, far from
increasing litigation, permitting Zodiac to rely on the amendment of the Patent,
would serve to put an end to the assessment.
53. On the facts of this case, Zodiac are not seeking to challenge any of the
conclusions reached by the Court of Appeal in the English proceedings. They
accept that they cannot say that the Patent, in its unamended form, is susceptible to
attack on the grounds raised in the English proceedings, or that Zodiac’s product
did not infringe the Patent in that form, or that Virgin is not entitled to an
assessment of damages. All that Zodiac are seeking to do is to contend that the
damages on the assessment should be assessed at nil (or, perhaps, a nominal
figure), because, as the Patent has been amended in the course of the EPO
proceedings, it is now retrospectively to be treated as amended, so that Zodiac’s
product does not infringe, and so Virgin have suffered no damage.
54. Further, Zodiac are not seeking to relitigate or raise a point which was
determined by the Court of Appeal in the English proceedings. Indeed, they could
not have raised the point that the Patent had been amended during those
proceedings, for the very good reason that it had not been revoked. Zodiac are
simply seeking to rely on a highly relevant event which occurred after the
determination of those proceedings, and which self-evidently would have a very
significant effect on the assessment.
55. It is true that the grounds upon which the TBA concluded that the Patent in
its original form had to be amended were grounds on which Zodiac had
unsuccessfully relied before the Court of Appeal, namely invalidity over the prior
art. However, Zodiac are not seeking to rely on those grounds in the assessment:
they are simply seeking to rely on the fact that the Patent has been amended. The
position would be the same if validity had not been in issue in the English
proceedings. The purpose of res judicata is not to punish a party for failing to take
a point, or for failing to take a point properly, any more than to punish a party
because the court which tried its case may have gone wrong. It is, as explained
above, to support the good administration of justice, in the public interest in
general and in the parties’ interest in particular. Assessed from either perspective,
Page 25
it seems to me wrong to prevent a person who has been held to infringe a patent
from invoking in proceedings thereafter a subsequent revocation or amendment of
the patent, in order to avoid liability for infringement (at least in the absence of
exceptional facts).
56. The inappropriateness of relying, as the Court of Appeal did, on the
approach in the normal run of cases is highlighted by the fact that the decision
between the will trustees and one annuitant in Waring [1948] Ch 221 was not
binding as between the will trustees and another annuitant. On the other hand, the
decision to revoke the patent in a case such as this and Poulton [1908] 2 Ch 430
can be relied on by everyone, even though the decision may have been reached in
proceedings in which only one person and the patentee (or its privy) was involved.
57. The point may also be made by considering a hypothetical case, instanced
in argument by Lord Sumption, where, after the Court of Appeal found for Virgin
on validity and infringement, another court decided that X’s product, which was
identical to that of Zodiac, did not infringe the Patent. That would not have been a
decision which would have assisted Zodiac in any way, as the position of Zodiac
and X would have been analogous to that of the two annuitants in Waring. A
decision on infringement is in personam, so it only binds the parties to the action
(and their privies), whereas a decision that a patent is invalid (or must be amended)
is in rem, so it binds the world, just as the patent, so long as it is in force, can be
enforced against the world.
58. 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.
59. This conclusion is supported by another point. As Virgin accept, any
injunction restraining Zodiac from infringing the Patent granted at the end of the
English proceedings either became ineffective or would have to be discharged,
following the amendment of the Patent in the EPO proceedings. In my view, there
is a logical difficulty with the notion that Zodiac cannot rely on the fact that the
Patent was retrospectively amended when it comes to the assessment, if they can
rely on the amendment in order to discharge or to ignore the injunction. It is true
that the injunction is prospective and the assessment retrospective, but the
amendment is both prospective and retrospective in its effect.
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60. Fletcher Moulton LJ rightly said in Poulton [1908] 2 Ch 430, 439, that
“[t]he order of revocation is in the nature of a judgment in rem which terminates
the res”, and he was also right when he added that “[i]t has … no further effect so
far as estoppel is concerned”. However, where he went wrong was to conclude that
this meant that the fact and consequences of the revocation could not be relied on
by a person who had previously been held to be an infringer, for instance when
damages come to be assessed. He acknowledged that “[a]s regards the world at
large, every one is bound by the fact that the patent ceased to exist”, and, as a
matter of legal principle and consistency, as well as a matter of common sense and
fairness, I consider that “every one” includes a party who has previously been held
to infringe it.
61. So far as the interests of patentees are concerned, it is inherent in the grant
of a patent under the Patents Act that, however often its validity may be
unsuccessfully challenged in earlier litigation, it may none the less be revoked (or
amended), and with retrospective effect, at some point by a court or by the EPO. A
patentee therefore must appreciate that it can never be sure that a decision of a
court that the patent is valid will settle the question for good. It is true that an
unsuccessful challenge to the validity of a patent by a particular person will
normally give rise to a res judicata to prevent that person raising another challenge,
but, as is common ground, it would not enable the patentee to rely on the patent
against that person once the patent had been revoked, at least in respect of what
would be infringements after its revocation.
Other matters
62. When seeking to justify a conclusion that, though it applies, res judicata
does not preclude a point being taken, it can be dangerous to invoke the
observation of Lord Keith in Arnold [1991] 2 AC 93, 109B, that estoppel is
intended “to work justice between the parties”, because it is only too easy to fall
back on it as an excuse for an unprincipled departure from, or an unprincipled
exception to, the rule. However, in a case where the rule has been relied on, I
consider that it is helpful for a court which is inclined to accept the argument that it
does not prevent a point being taken, to consider whether that outcome would
work justice between the parties. In this case, as in cases such as Poulton, it seems
to me that it would be positively unjust, as between the parties, for a (former)
patentee to recover damages for infringement of a patent after the patent has been
irrevocably and retrospectively revoked (or, as in this case, relevantly amended).
And I can see no public interest in such an outcome. There is no question of extra
further litigation, as it is undeniable that the Patent has been revoked (or amended);
indeed, further litigation will be avoided as the assessment need not proceed.
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63. In the course of his submissions on behalf of Virgin, Mr Crow QC relied on
the doctrine of merger, viz the principle whereby whatever rights a claimant has
against a defendant are treated as merged into the order made in the proceedings. I
do not think that that aspect takes the point at issue on this appeal any further.
64. Mr Crow realistically did not suggest that it would cause any problems if
we were to overturn a decision which had stood for over a hundred years and had
been followed and applied in the last ten years. We therefore do not have to
address the problem which was faced by the House of Lords in Hindcastle Ltd v
Barbara Attenborough Associates Ltd [1997] AC 70, when they decided to
overturn an early twentieth century decision of the Court of Appeal which had
stood for around a century.
65. We were taken to some articles on the attitude of the courts of Germany,
France and the Netherlands to the point raised in these proceedings. I am not
confident that we have a full and accurate picture of the position in those three
jurisdictions, but it seems clear that, to put it at its very lowest, there is not a
consistent approach which could be said to reflect Virgin’s contention in this case.
Indeed, my strong impression is that Zodiac’s contention is closer to the practice in
those three countries. However, as Mr Crow submits, that is of little weight, as this
is the sort of issue which has to be resolved by reference to domestic law, and is
not the subject of any attempt to harmonise practices across the EPC territories.
66. As to the temporal limit of Zodiac’s right to rely on the amendment of the
Patent in the assessment of damages, I have no doubt that they could raise the
amendment until judgment for the assessed damages had been drawn up, or passed
and entered to use the time-honoured legal expression. While the court would, I
think, have power to refuse to do so, I would expect it normally to agree to reopen
such a judgment if any revocation or amendment was raised before the assessed
damages had been paid.
67. If the Patent had been amended after the order had been formally passed
and entered, but before the damages had been paid, I suspect that the only course
open to Zodiac would have been to seek to appeal against the award of damages,
relying on the amendment as new evidence, as strict cause of action estoppel
(indeed merger) would apply. Once the damages had been paid, it seems to me that
an alleged infringer would have to try and raise a restitutionary claim if it wished
to recover the damages on the ground that the patent had been revoked or varied. I
express no view on the strength of such a claim, which may well be highly
dependent on the facts of the particular case.
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68. This conclusion renders it unnecessary to consider whether, if Poulton was
rightly decided, it would none the less be open to Zodiac to rely on the amendment
of the Patent in the assessment, because the amendment was effected in the EPO
rather than in a domestic court. I find it slightly difficult to consider that
hypothetical question, not merely because I would be proceeding on an artificial
hypothesis, but also because my reasons for concluding that Poulton was wrongly
decided in relation to a UK patent apply a fortiori to a European patent.
Conclusion
69. Accordingly, for these reasons, which follow those of Lord Sumption, and
with whose reasoning I agree, I would allow Zodiac’s appeal, and overrule the
decisions in Poulton and Coflexip. It also follows that I disagree with the reasoning
of the Court of Appeal in Unilin. I also agree with what Lord Sumption says in
para 38 about the guidance given by the Court of Appeal in Glaxo Group Ltd v
Genentech Inc (Practice Note) [2008] Bus LR 888.
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