Patents: second action for new infringements in the IPEC

Background

In patent cases, accepted practice is to allow the successful patentee to add other infringements not pleaded in the liability trial in the inquiry as to damages or account of profits (Unilin Beheer BV v Berry Floor NV ([2007] EWCA Civ 364).

Civil Procedure Rule (CPR) 63.23(2) provides that parties in IP Enterprise Court (IPEC) proceedings should only be allowed in exceptional circumstances to submit material other than that permitted by the court at the CMC.

Facts

AP sued A for infringement of its patent relating to disc brake calipers for racing cars (the original action). The Patents County Court (now IPEC) held that the patent was invalid for added matter. AP appealed.

The Court of Appeal allowed the appeal. It reversed the decision on added matter, decided the patent was valid, and ordered an account of profits or an inquiry as to damages at AP’s election.

Before its election, AP sought disclosure, not just in relation to products in the original action but also other calipers sold by A. A rejected this broadening of AP’s claim to relief and limited its disclosure to products in the original action. AP elected for an inquiry in relation to the original action products.

At the CMC, directions were given solely in relation to the original action products. Later, AP renewed its claim for disclosure in respect of the further calipers, which A resisted. AP then abandoned its claim for relief in the inquiry with regard to calipers other than the original action products and instead started a new action (the second action). In the second action, AP alleged that the patent had been infringed by A’s manufacture and sale of ten types of calipers different from the original action products.

A applied to strike out the second action on the basis that, since seven of the calipers were publicly available before the original action, AP could have included them in the original action. Therefore the second action was an abuse of process.

The IPEC refused to strike out the second action to add the further alleged infringements after the patent was held in the original action to be valid and infringed by some of the products cited in that action. The second action was not abusive because patent practice allowed a successful patentee to add products at the stage of inquiry as to damages or account of profits.

A appealed, arguing that the effect of CPR 63.23(2) was to exclude the Unilin practice save in exceptional circumstances. AP also challenged statements made by the IPEC that the reforms of civil procedure meant that, in the IPEC, a patentee was not entitled to litigate a broader range of alleged infringements in an inquiry or account.

Decision

The court dismissed the appeal. It held that the second action was not an abuse of process.

The costs cap that normally applied to actions in the IPEC would not apply to the second action because, in effect, the patent had a certificate of contested validity. This was not oppressive because A had been offered a choice by AP as to whether the seven calipers should be included in the damages inquiry or in the second action. Any prejudice as a result of their inclusion in the second action was caused by A’s failure to accept that the seven calipers could be litigated in the inquiry. Also, it was only prejudicial if A were to lose. If A won the action in respect of the seven calipers then the absence of a costs cap was to its benefit. If there was relevant prejudice A could apply for a costs cap to be imposed.

The court dismissed A’s argument about CPR 63.23(2). Proceedings in the IPEC are generally split between liability and quantum. There will be a first CMC on liability and then a further CMC, if liability was established, on financial relief. The CMC in relation to damages or an account of profits would necessarily allow for documents and evidence concerning quantum to be introduced, in addition to those at the liability trial. So CPR 63.23 should be applied separately in respect of both CMCs. At the quantum CMC the court could decide which issues and infringements should be included.

Generally, rights-holders should not be required to produce evidence of every possible infringement in the liability hearing but merely sufficient examples to enable infringement to be dealt with in a cost-effective and expeditious way. Requiring claimants to specify all infringements at the liability trial would be wasteful and time-consuming. The Unilin practice of allowing further infringements, once liability was established, to be considered at the damages inquiry complied with the aims of the IPEC to simplify infringement trials, shorten proceedings and keep them cost-effective.

Civil procedure reforms, including the overriding objective, did not mean that in the IPEC, if further allegations of infringement required additional evidence, patentees would be unable, except in unusual circumstances, to litigate further infringements in an inquiry or account. If that were so, in the IPEC, unlike the High Court, a claimant would be required to come to the first CMC with all possible infringements. If any were missed out, which could have been discovered by reasonable diligence, and if they required further evidence in order to consider them, patentees would be debarred from claiming in respect of them. As a result, in respect of all further infringements, a free licence would be granted because no injunction could restrain them and no damages or other relief would be recoverable.

The IPEC was not an exception to the general law in this regard. When faced with allegations of abuse of process it had to consider whether or not oppression had occurred. The practice set out in Unilin applied to the IPEC. If a damages inquiry was unduly complex, then it could be transferred by the IPEC to the High Court once liability had been established.

Comment

Damages inquiries and account of profits are becoming more common in the IPEC due to the more streamlined procedure and cap on recoverable costs which allow disputed factual points to be ruled on more quickly and without the risk of an adverse costs award.

This decision is important for patentees considering whether to bring an infringement action in the High Court or in the IPEC. If damages or an account of profits could only be recovered in the IPEC for infringements specified in the pleadings or identified at the liability CMC, the IPEC would become an unfavourable court for all but the simplest of cases and technologies. Conversely, defendants often argue that products different from those examined in the liability trial do not infringe, meaning that evidence relating to infringement also has to be given in the damages inquiry.

Case: AP Racing Ltd v Alcon Components Ltd [2016] EWHC 815.

First published in the June 2016 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.