LIFFE Administration and Management v Pinkava & others
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE KITCHIN,Mr Justice Kitchin |
| Judgment Date | 24 March 2006 |
| Neutral Citation | [2006] EWHC 595 (Pat) |
| Docket Number | Case No: HC 05 1939 |
| Court | Chancery Division (Patents Court) |
| Date | 24 March 2006 |
[2006] EWHC 595 (Pat)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
PATENTS COURT
Mr Justice Kitchin
Case No: HC 05 1939
Dr Justin Turner and Mr Miles Copeland (instructed by Clifford Chance) for the Claimant
Mr Guy Tritton (instructed by Wragge & Co) for the Defendants
Hearing dates: 26–27, 30–31January, 1–3, 7–9 February 2006
Approved Judgment (redacted for publication)
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE MR JUSTICE KITCHIN
Introduction
This is the trial of an action concerning the ownership of a number of connected inventions relating to trading on a financial exchange. The claimant ("LIFFE") operates the well known London futures exchange. LIFFE was acquired by Euronext N.V. in the first quarter of 2002. After the takeover, Euronext N.V. rebranded its derivatives business in London, Amsterdam, Brussels, Paris and Lisbon as "Euronext.liffe". The first defendant ("Dr Pinkava") was employed in the Marketing Division of LIFFE from 21 July 2001 to 13 July 2005. The second defendant is a company incorporated under the laws of England and Wales and is controlled by Dr Pinkava.
In July 2004, Dr Pinkava devised a system and related inventions which permit the trading on an electronic exchange of various types of financial instruments known as credit default swaps, credit index swaps, interest rate swaps and overnight index swaps. Dr Pinkava initially believed that the system and inventions he had devised belonged to LIFFE. However, in early January 2005, he received professional advice which led him to believe that they belonged to him. He communicated this view to LIFFE. It is this assertion of ownership that has given rise to the current dispute.
From the beginning of February 2005, Dr Pinkava remained at home on full pay and took the opportunity to instruct patent agents. He was evidently advised that his ideas were, in essence, business methods and consequently not patentable in Europe. There is, however, no such exclusion from patentability in the U.S. Accordingly, he wrote up four U.S. patent applications which were filed on 23 April 2005. The applications were assigned to the second defendant at some time between 24 June 2005 and 22 July 2005.
In early July 2005, Dr Pinkava informed LIFFE that he had filed patent applications in respect of his systems. On 20 July 2005, LIFFE commenced these proceedings alleging misuse of confidential information, breach of contract and seeking, inter alia, declarations that LIFFE is the owner of the U.S. patent applications. Shortly thereafter Dr Pinkava commenced proceedings in the Patent Office under s.12 of the Patents Act 1977 ("the Act") seeking, inter alia, an order that he is the owner of the inventions embodied in the U.S. patent applications. At the same time Dr Pinkava requested the Comptroller to transfer the proceedings to the High Court in the light of the existing High Court proceedings. LIFFE consented to this request and, accordingly, in addition to the proceedings commenced by LIFFE, I have before me the reference by Dr Pinkava of the question whether he is the owner of the inventions and is entitled to apply for patent protection.
Legal background
Despite the breadth of LIFFE's claim, it became apparent during the course of LIFFE's opening that my judgment in this case must depend upon the application of the relevant provisions of the Act.
—(1) Notwithstanding anything in any rule of law, an invention made by an employee shall, as between him and his employer, be taken to belong to his employer for the purposes of this Act and all other purposes if—
(a) it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties; or
(b) the invention was made in the course of the duties of the employee and, at the time of making the invention, because of the nature of his duties and the particular responsibilities arising from the nature of his duties he had a special obligation to further the interests of the employer's undertaking.
(2) Any other invention made by an employee shall, as between him and his employer, be taken for those purposes to belong to the employee."
Section 42 of the Act reads, so far as relevant:
"Enforceability of contracts relating to employees' inventions.
42.—(1) This section applies to any contract (whenever made) relating to inventions made by an employee, being a contract entered into by him—
(a) with the employer (alone or with another); or
(b) with some other person at the request of the employer or in pursuance of the employee's contract of employment.
(2) Any term in a contract to which this section applies which diminishes the employee's rights in inventions of any description made by him after the appointed day and the date of the contract, or in or under patents for those inventions or applications for such patents, shall be unenforceable against him to the extent that it diminishes his rights in an invention of that description so made, or in or under a patent for such an invention or an application for any such patent."
I must also refer to s.43 which says, so far as relevant:
"43.—(1) …..
(2) Sections 39 to 42 above shall not apply to an invention made by an employee unless at the time he made the invention one of the following conditions was satisfied in his case, that is to say-
(a) he was mainly employed in the United Kingdom"
(3) ….
(4) Any references in sections 39 to 42 above to a patent and to a patent being granted are respectively references to patent or other protection and to its being granted whether under the law of the United Kingdom or the law in force in any other country or under any treaty or international convention."
In the light of these provisions the following matters were agreed between the parties. First, s.39 applies to the inventions in issue because Dr Pinkava was mainly employed in the United Kingdom when he made them (s.43(2)). Secondly, this is so notwithstanding the fact that Dr Pinkava has applied for patents in the U.S. (by necessary implication from s.43(4)). Thirdly, if LIFFE does not succeed in establishing entitlement under the Act then its claim must fail because it is not possible to contract out of the operation of s. 39 (s.42(2)). I should add that the parties were also agreed that s.39 applies even though the inventions may not qualify for the grant of patent protection under the Act.
LIFFE bases its case upon s.39(1)(a). This has two limbs, each of which is relied upon. An invention belongs to the employer if:
i) It was made in the course of the normal duties of the employee, or
ii) It was made in the course of duties falling outside his normal duties, but specifically assigned to him.
In either case there is a second requirement: it must be shown that the circumstances were such that an invention might reasonably be expected to result from the carrying out of his duties.
The scope of s.39(1) was considered by Falconer J in Harris' Patent [1985] RPC 19. Mr Harris was employed by Reiss Engineering ("Reiss"). Reiss sold Wey valves used for controlling the supply of coal dust through a duct. They were made by a Swiss supplier. If a problem developed with a valve then Reiss would report it to the supplier. Mr Harris was primarily concerned with obtaining sales and providing an after-sales service in the course of which he would deal with problems that customers experienced with their installations. In the summer of 1978 Mr Harris was told that he was being made redundant and his employment came to an end in December. In the meantime he devised an improved valve. Reiss contended that the invention belonged to them by virtue of s.39(1)(a) on the basis it was made in the course of Mr Harris's normal duties and the circumstances were such that an invention might reasonably be expected to result. They also relied upon s.39(1)(b), but that is not material to the present case. Falconer J. rejected the claim on the basis that it was never a part of Mr Harris's duties to apply his mind to problems arising in the design of the Wey valves. In the course of his judgment he said this at p.29:
"As to the second requirement in the paragraph, that is to say, whether the circumstances were such that an invention might reasonably be expected to result from his carrying out those duties, Miss Vitoria submitted that the circumstances referred to in paragraph (a) must be the circumstances in which the invention was made; and it seems to me that submission must be right. Mr. Pumfrey, in the course of his argument, pointed out that the wording of the paragraph was "an invention might reasonably be expected to result" and not "the invention might" and so on. But plainly, the wording "an invention" cannot mean any invention whatsoever; it is governed by the qualification that it has to be an invention that "might reasonably be expected to result from the carrying out of his duties" by the employee. That wording applies equally to the second alternative in paragraph (a), that of "specifically assigned" duties falling outside the employee's normal duties; and, therefore, in my judgment the wording "an invention might reasonably be expected to result from the carrying out of his duties" must be referring to...
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