Patents: interpretation of Crown use provisions

Background

Crown use provides a defence where a person is authorised in writing by a government department to do any act for the services of the Crown which would otherwise be an infringement of a patent. Where the defence applies, the government department concerned is responsible for compensating the patent owner for that use.

A defendant to a patent infringement action can only take advantage of the Crown use defence if the written authorisation has been given in relation to a patented invention (section 55(1), 1977 Act) (section 55(1)).

Article 31 of the World Trade Organization's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Article 31) deals with use of the subject matter of a patent without the authorisation of the rights holder.

Facts

I alleged that V's network infrastructure equipment for 4G infringed one of its standard essential patents (SEPs) for telecommunications. V argued that it was entitled to a Crown use defence when it provided priority access to its network for emergency responders under a written government authorisation.

The Patents Court held that the Crown use defence had been established. I appealed.

The Secretary of State for Defence (SoS) intervened to challenge the conclusion on Crown use.

Three possible interpretations of "authorised in writing by a government department" in section 55(1) had been put forward to the Patents Court:

• An express authorisation to work the patent in issue (the first interpretation).
  
  
• Either an express authorisation to work the patent or an authorisation to do a particular act in circumstances where that act necessarily infringed the patent (the second interpretation).
  
  
• An authorisation to do a particular act even if that did not necessarily involve infringing the patent (the third interpretation).

It was technically possible to comply with the government’s requests without infringing I's patent and so V could only succeed if the third interpretation was correct, as held by the Patents Court. The SoS argued that the first interpretation was the correct one, except that an express authorisation to work any patent would suffice. I argued that the second interpretation was correct.

Decision

The court allowed the appeal. It held that the third interpretation was not correct and that, while it was not necessary to decide whether the first or second interpretations was correct, the second interpretation was to be preferred.

The most natural interpretation of the language of section 55(1) is that the authorisation has to be to do acts in relation to a patented invention, not merely an authorisation to do acts. The concept of authorisation is one familiar from the law of agency, in which actual authority may be either express or implied. The usual basis for implication is necessity, so it is difficult to see why section 55(1) should exclude an authorisation to do an act which necessarily infringes a patent. It is equally difficult to see why it should extend to an authorisation to do an act which does not necessarily infringe a patent.

The authorisation has either to be an express authorisation to work a specific patent or an authorisation to do a particular act which necessarily involves working a specific patent. The court rejected the SoS's argument that the first interpretation was required for the Crown to make an informed decision between contractors bidding for a government contract.

The third interpretation would place a much greater burden on the Crown and potentially expose the Crown to a greater liability if a contractor chose to work a patent which was subject to a higher royalty rate than another. The first and second interpretations enable the Crown, if it chooses, to expressly authorise the working of the lower cost patent.

Normally, where A buys goods from B, in the absence of express contractual terms, B impliedly warrants, as part of the warranty of quiet possession, that the goods do not infringe third-party intellectual property rights. The burden is on the supplier to ensure that the goods are non-infringing or licensed, not on the buyer. There is no reason why this should be different if the Crown does not authorise use of the patent either expressly or by necessary implication. It is difficult, particularly in the context of standardised telecommunications networks, to conduct freedom-to-operate analyses, but that does not support the third interpretation. Suppliers were better placed to conduct these analyses than buyers or the Crown.

The fact that the Crown often contracts on terms that either expressly provide that no authorisation is granted under section 55 or require the supplier to indemnify the Crown against any liability under section 55 does not assist in interpreting the requirement for authorisation.

Policy considerations support a narrow rather than a broad interpretation of section 55(1). The policy which underpins section 55(1) is one of respect for private intellectual property rights unless state exploitation is in the public interest, in which case the owner of the right should be notified and compensated.

If possible, the 1977 Act ought to be interpreted consistently with TRIPS. The first and second interpretations of section 55(1) were more consistent with Article 31 than the third.

Comment

This interpretation of the Crown use provisions shifts the balance between government and private interests in use of a patented invention closer to the interests of the patent owner. As this means that those contracting with the government cannot rely on the Crown use provisions of the 1977 Act automatically cancelling the effects of the implied warranty of quiet possession, for their own protection they should try to discover whether performance of the contract could infringe a third party’s patent and get specific written authorisation to do so. Similarly, it would be in the government’s interest to know whether it could become liable for compensation to the patent owner.

Case: IPCom GmbH & Co KG v Vodafone Group plc and others [2021] EWCA Civ 205.