The High Court has held that threats made in relation to a patent application were capable of justification, and that the trial of the threats issue should be delayed until after the patent had issued.
An applicant for a patent may bring proceedings in respect of any act only if the act would, if the patent had been granted on the date of the publication of the application, have infringed not only the patent, but also the claims in the form in which they were contained in the application immediately before publication (section 69(2)(b), Patents Act 1977) (1977 Act).
Threats of infringement proceedings may be justified if the acts in respect of which the proceedings were threatened constitute, or, if done, would constitute patent infringement (section 70(2A), 1977 Act) (section 70(2A).
The Court of Appeal has held that a threat made before grant would be understood as a threat to bring proceedings after grant. No difficulty arose in deciding whether the threats could be justified provided that appropriate steps were taken to ensure that the patent was granted before trial. (Brain v Ingledew Brown Bennison and Garrett [1996] FSR 314).
N and G entered into a licence agreement, under which G was exclusively licensed under N's patent application to make and distribute a flood barrier. After the licence was terminated G stopped selling the barrier and started selling an alternative product. N made threats of patent infringement proceedings against G. G then started proceedings against N for groundless threats. N counterclaimed for royalties due from G under the licence.
G applied for summary judgment on the ground that the threats could not be justified because they were threats of proceedings for infringement of a granted patent, and the application had not been granted. The Intellectual Property Enterprise Court (IPEC) refused this application.
Shortly before trial, the European Patent Office (EPO) granted the patent. N asked for the trial of the threats claim to be adjourned. The IPEC ordered an adjournment. G appealed the refusal of summary judgment and the adjournment.
The court dismissed the summary judgment appeal and upheld the adjournment.
Threats were capable of justification under section 70(2A). By creating a tort of strict liability which did not require proof of actual damage, section 70 acted as a restraint on commercial freedom of speech and an obstacle to the negotiation and settlement of patent disputes without resorting to infringement proceedings. So, the court should be slow, absent clear wording, to conclude that section 70 of the 1977 Act (section 70) made a class of threats incapable of justification.
Section 70 was aimed at the damage that could be caused to a manufacturer or importer of goods by threats of patent infringement proceedings directed at its customers. However, it was clear from section 70(2A) that it was lawful to make these threats where they were justified. In considering whether a threat was justified, what mattered was whether the person making the threat was ultimately able to obtain relief in respect of the acts in question.
Section 70(2A) required the court to consider whether the acts for which proceedings were threatened constituted an infringement, not whether the terms of the threat were justified.
The availability of the defence of justification ought not to depend on the precise manner in which the threat was expressed and, in particular, whether the author of the threat took sufficient care to distinguish between the rights conferred by a granted patent and the contingent rights conferred by a patent application if and when it proceeded to grant.
Following Brain, the reference in section 70(2A) to acts which constitute an infringement of a patent can extend to infringement of the rights conferred by a patent under section 69 of the 1977 Act.
There was a need for certainty and difficulties could arise if the patent was not granted by the date of trial. However, there were many other sources of uncertainty, such as the likely need for a trial of issues of infringement or validity, or a possible appeal. Also, where a European patent was involved, the patent might be subject to lengthy opposition proceedings in the EPO. The additional uncertainty, if grant of the patent was still awaited at the date of the threat, may be undesirable but it did not greatly alter the position.
It was common in threats cases for the claimant to seek and obtain an interim injunction to restrain the making of further threats pending trial. If G was protected by an interim injunction, then it should not be prejudiced by a delay in the trial of the justification issue until the patent was granted. While G would not want potential liability under any cross-undertaking given in return for the interim injunction for an open-ended period, in most cases N would not have sustained any recoverable loss through being wrongly restrained from making threats because the threats turned out to have been justified.
Although the timing of the grant of the patent was uncertain, by the trial date, the claims were fixed and grant was imminent. The decision to adjourn the trial was within the ambit of the IPEC's case management powers and overall discretion.
Proceedings for groundless threats often arise from statements made by non-lawyers, who have not taken specialist legal advice and may come from a country whose law on threats of patent infringement proceedings differs from that of the UK. For this reason the availability of the defence of justification should not depend on the precise manner in which the threat was expressed, and whether the author of the threat distinguished between the rights conferred by a granted patent and the contingent rights conferred by a patent application. However, it may be necessary to agree to an undertaking or injunction not to make any further threats. Here, the patent issued shortly after the trial so the delay to the threats trial was expected to be short: it is not clear whether the result would be the same if several years of delay had been likely.
Case: Global Flood Defence Systems Ltd and another v Johan Van Den Noort Beheer BV and others [2016] EWHC 1851 (Pat).
First published in the September 2016 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.
