22 August 2003

Jacqueline Irvine

1. Res judicata - the basic principles

Res judicata, latin for “the thing has been decided” is, in the simplest terms, the principle that a matter in respect if which final judgment has been given cannot be re-opened. Res judicata is a concept which is also applied in most other jurisdictions – for example – the United States, Canada and in Europe (including the European Court of Justice).

Res judicata occurs where a judicial tribunal having jurisdiction over the case disposes once and for all of the matters decided, so that except on appeal they cannot afterwards be relitigated. The effect of such a decision is twofold: (a) to estop any party to the litigation or his privies from disputing, against any other party or his privies, in later litigation, the correctness of any decision; and (b) where the action succeeds, the right or cause of action set up is extinguished, merging in the judgment such that no further claim may be made upon the same cause of action in subsequent proceedings between the parties or their privies.

The rationale for res judicata is centred on public policy – it is in the interests of the state that there should be an end to litigation; further, it avoids hardship on the individual against whom the litigation would otherwise be brought since he would otherwise be vexed twice for the same cause.

There are a number of types of estoppel:

(a) Cause of action estoppel - For this to apply, the earlier judgment must have been the final judgment and there must be identity of parties and subject matter in the former and present litigation;

(b) Issue estoppel –within one cause of action there may be several issues raised which are necessary for determination of the whole case. Once an issue has been raised and distinctly determined between the parties, as a general rule neither party can be allowed to fight that issue again save in special circumstances;

(c) Abuse of process – this refers to an abuse of process not qualifying as res judicata – the seminal case is Henderson v Henderson[1] which essentially extended the scope of res judicata by providing that it was an abuse of process to attempt to raise in later actions issues which, could, and should have been raised in the earlier proceedings.

2. Coflexip SA & Ors v Stolt Offshore MS LTD & Ors

(a) Background

Coflexip SA & Ors v Stolt Offshore MS LTD & Ors has recently raised, for the first time in the English Courts since 1908, the issue of the application of res judicata in circumstances where a patent has been found valid and infringed by a Defendant in one action, but before any damages have been assessed or paid, that same patent has been found invalid in a challenge brought by a third party. The issues are of particular interest when one appreciates that the generally accepted view is that a patent, once deemed invalid and revoked is invalid ab intitio, as if it had never lived. Hence, should Stolt be ordered to pay damages, it is doing so on what is effectively (subject to any successful appeal by Coflexip in Rockwater) a non-existent right and one in respect of which is it generally considered an injunction would fall away on revocation.[2]

Stolt were found to have infringed Coflexip’s patent in relation to a method of laying flexible submarine pipe and equipment for performing those methods (generally for use in the oil and gas industry) in a decision of Laddie J handed down on 22 January 1999. The Court of Appeal upheld the decision on 31 July 2000 and a damages inquiry ensued. Coflexip is claiming between £50-£70 million plus interest. The hearing in the damages inquiry has been set down for April 2004.

However, a third party, Rockwater challenged the patent successfully earlier this year. Rockwater based their case for revocation of the patent on prior art which had not been relied on by Stolt. Before the same Judge – Laddie J – they succeeded. The patent was ruled invalid and ordered to be revoked by Laddie J on 15 April 2003. The decision is being appealed. Stolt sought to have the damages inquiry stayed pending the outcome of the decision of the Court of Appeal in the Rockwater case (since it would be premature to decide the effect of the revocation until all appeals in respect of it had been effectively disposed of). The issue came to be decided by Jacob J on 22 July 2003.

(b) Poulton v Adjustable Cover and Boiler Block Co (1908) 25 RPC 529

The issue has, as hinted at in the previous paragraph, previously come before the English Courts. In Poulton the Court of Appeal considered issues on facts which Jacob J described as “not materially different” from those in this case. The patentee succeeded in an infringement action against the defendant and an inquiry as to damages was ordered. Thereafter the same defendant adduced further evidence of prior user such that the patent was revoked. On the inquiry it was found that, on account of the revocation, the patentee had not suffered any damages, but if it was entitled to damages the amount thereof was 110 pounds.

On appeal, the patentee argued that the defendant was estopped from relying on the revocation at the damages inquiry. The Court of Appeal held that the damages were payable. The revocation finding (obtained by the defendant as a representative person, not in his own character) could not be relied on by the defendant in his capacity as defendant in the infringement action so as to overturn the order for damages. Even though, in theory, a finding of invalidity meant the patent was null and void from the very first, this had no effect on the existence of estoppel in respect of the defendant: “assuming that the effect of the Order revoking the Patent might be that the Letters Patent are not only to be treated as null and void at that moment and from the date of that Order, but that they are treated as null and void from the very first, so that the Letters Patent never had any valid existence whatsoever – it does not affect in the slightest degree…the existence of the estoppel which prevents the defendant [denying the judgment against him]” (Vaughan Williams LJ).

(c) The main arguments in Coflexip SA & Ors v Stolt Offshore MS LTD & Ors

Coflexip contended that there was cause of action estoppel arising from Coflexip’s action for infringement, which succeeded, and Stolt’s counterclaim as to validity which was dismissed. Further, there was issue estoppel insofar as the issue of validity had been raised and argued and it was held that the patent was valid. A final judgment had been given and there was an estoppel acting in personam between the parties. In short, the patent was valid and infringed as against Stolt and Stolt could not be heard to say otherwise.

Stolt argued that the Court should exercise its discretion under Pt 3.2 of the Civil Procedure Rules, a discretion aimed at dealing with cases justly, to grant a stay. They argued that the judgment in Stolt’s case had not been fully and finally enforced and therefore, in the interests of justice and save potentially unnecessary costs, the inquiry should be stayed.

Further, Stolt contended that the law on estoppel had changed since 1908. Firstly, Stolt sought to rely on Johnson v Gore Wood [2002] 2 AC 1, arguing that in that case the House of Lords had rejected a “too mechanical” approach to estoppels of all kinds such that they were not simply subject to general considerations of public policy. In particular, Stolt referred to the comments of Bingham LJ who, in respect of issues which could have been raised in earlier proceedings but were not, cautioned against adopting “ 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. …Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.” Stolt also pointed to jurisprudence in the United States, and, in particular, Mendenhall v Barber-Greene Co (Court of Appeal for the Federal Circuit 26 F.3d 1573) where the doctrine of collateral estoppel is invoked to prevent the patentee recovering damages in a situation such as the one arising in Stolt’s case.

Additionally, they pointed to the Community Patent Convention (“CPC”), contending that it had effected a change in Patents Act 1977, importing into the Act, inter alia, Article 35 , CPC. Article 35 CPC states that the effect of revocation is that even if a final decision has been given, repayment for sums paid under contracts made when the patent was thought valid may be countenanced “to an extent justified by the circumstances…on the grounds of equity”.

(d) The judgment of Jacob J

In the judgment handed down on 31 July 2003, Jacob J refused to grant the stay. Poulton was a “formidable obstacle”. It had not been doubted by the textbooks. The facts were not materially different from the instant case and, quoting extensively from the judgments of Parker J and the Court of Appeal, Jacob J ultimately concluded that Poulton was good authority that a decision as to validity would be res judicata as between the parties such that damages were payable by Stolt. He went on to consider and reject the two “escape routes” put up by Stolt’s Counsel.

Jacob J found that Poulton was consistent with recent House of Lords authorities such as Arnold v National Westminster Bank [1990] All ER 529; [1991] 2 AC 93– while there might be latitude in relation to issue estoppel it was clear from that case that this was of no avail in relation to cause of action estoppel as in Stolt’s case which meant that the bar was absolute. Jacob J did not consider that Gore Wood changed the law as to the effect of cause of action estoppel so as to reject a mechanical approach that all estoppels should be considered in light of the overall balance of justice and public policy. He noted that while the House of Lords might re-examine such rules in the future, it had not done so in that case nor had it sought to formulate an all-embracing policy rule for all kinds of estoppel.

Jacob J did not consider that the US case of Mendenhall assisted because in the US invalidity of a patent was dealt with differently – not by revocation but by allowing defendants to plead collateral estoppel. He also differentiated the policy considerations at play in Mendenhall because in that case it appeared the plaintiffs sought to maintain their financial claim for past infringements and the injunction itself and because, in the US, the validity decision was not final until the conclusion of accounting. Hence, it did not assist in this case where the cause of action estoppel meant the validity decision was final.

The Judge did not consider that Article 35 CPC could be relied on by Stolt. The effect of the preamble to the Patents Act 1977 and s130(7) was not that the word “revocation” in s72 Patent Act 1977 should be read as meaning revocation in the sense of the CPC. Section 72 merely set out the grounds of revocation and did not seek to deal with its legal effects. The consequences in Article 35 could not simply be read into it. Had the draftsman intended this he could have incorporated a clause similar to Article 35 into the Patents Act, as had been done in respect of other provisions. Further, there were provisions in the Patents Act which were inconsistent with the CPC such that one must infer that only the specified provisions in s130(7) were intended to have the same effect as the corresponding CPC provisions. However, Jacob J did reject Coflexip’s argument that the CPC was not ratified and was therefore irrelevant.

Jacob J concluded that the stay should be refused. The main practical concerns in favour of a stay were costs and waste of court time. The costs were at the risk of Coflexip, as their Counsel had stated. A stay would be unfair to Coflexip because they would not receive payment for at least another 2 years and would effectively be funding a competitor and deprived of interest during this time. The world was an uncertain place and, in view of the amounts in issue, delaying would expose Coflexip to greater uncertainty.


It is easy to understand why most jurisdictions have, in some form or another, a concept of res judicata – it would create havoc if decision were never final, if litigants could re litigate the same wrong. Traditionally, res judicata estoppel can only be avoided in limited circumstances such as fraud or collusion.

However, there have been signs of a thawing of a rigid approach to estoppel in various ways. It is now recognised that “special circumstances” may allow a court to reject issue estoppel (Arnold v National Westminster Bank). The Courts have also, on occasion given leave to appeal out of time in certain cases – even where there is cause of action estoppel. Hence, while cause of action estoppel binds absolutely, the courts have allowed appeals out of time where subsequent decisions of a higher court show the law to have been erroneous (eg Property and Reversionary Investment Corp v Templar and another [1978] All ER 433]) Further, although Jacob J did not consider that Gore Wood had changed the law, there were very clear indications in that case that the Courts were backing away from an application of estoppel which was blind to the merits. A similar indication of such flexibility is Taylor and Another v Lawrence and Another [2002] 2 All ER 353 in which the House of Lords held that the Court of Appeal could reopen an appeal after it had given final judgment and that judgment had been drawn up if it was clearly established that a significant injustice had probably occurred and that there was no alternative effective remedy. The Court in Taylor was conscious of the need to protect the expectations of those who thought the litigation is at an end but saw it as counterbalanced by the requirements of justice.

The policy issues at play are brought into particular focus because a patent, once revoked, in invalid against all the world and there were hints in Jacob J’s judgment of the potential conceptual complexities and arguably inconsistencies to which this could give rise. Hence, in Poulton the majority of the Court of Appeal accepted that a patent, if invalid, would be void ab initio and Jacob J accepted this as well, noting that Fletcher- Moulton LJ appeared to be alone in his view that the order for revocation only took effect from the time of pronouncement and commenting that such a view “has no other support of which I know”. However, Jacob J did not consider that this was of any avail to Stolt in respect of the damages it would pay at the conclusion of the inquiry, even though he appeared to accept that Stolt would no longer be liable for breach of an injunction for infringing the patent if it was revoked. He did appear to be puzzled as to why this should be and his question “Why is it that the defendant can say ‘but there is not patent’ to that charge but not to a claim for damages?” is one of the reasons why this case is so interesting and, in terms of rationale and policy considerations, perhaps more complex that other cases where the issue of res judicata has arisen. Jacob J speculated, without deciding, that the answer might be that “the difference is just that – that there is a difference between saying ‘there is no patent’ and ‘there was no patent’”.

Should it be the case in such a situation that the patent is invalid against all the world save for Stolt, against whom, by virtue of the judgment against them, the patent is valid and infringed even where the damages have not been paid? The countervailing policy issues at work are perhaps best captured in a quote from the judgment of Jacob J who observed “[The proposition] that it would be monstrous if [Stolt] have to pay an enormous sum in respect of violation of a wholly non-existent right…has a lot to be said for it, but it does not follow that it is right. After all, Stolt lost and their case and are seeking to take advantage of the success of others as though it applied to them too”.

In light of Poulton, it is, ultimately, not surprising perhaps that at first instance Stolt failed to get a stay of the damages inquiry. In accordance with the doctrine of precedent, the decision, if binding, could only be overruled by the Court of Appeal or House of Lords. This is, however, a legal landscape significantly changed from that of 1908 – the radical reforms to the Civil Procedures Rules by Lord Justice Woolf which came into effect on 26 April 1999 have heralded a new age - in which notions that what is substantively just, fair and proportionate are increasingly important and indeed enshrined in a core principle called the “overriding objective” (CPR 1). The decision is being appealed to the Court of Appeal and it will certainly be interesting and create, in some small part, legal history to find out what the answer is in this frought area with is countervailing policy considerations. The time is certainly ripe for the limits and meaning of that old legal chestnut – res judicata – to be explored and its rationale articulated in the higher courts.

Due to be published in the September 2003 edition of WIPR.

[1](1843) 3 Hare 100

[2]See for example, Terrell on Patents 13.12: while an injunction in respect of infringing a patent is not likely to be lifted on revocation, “the defendants’ acts cease to be infringing by reason of the revocation of the patent in respect of which the injunction is granted”.