Schütz (UK) Ltd v Werit (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | or |
| Judgment Date | 29 July 2011 |
| Neutral Citation | [2011] EWCA Civ 927 |
| Date | 29 July 2011 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2010/1274 |
[2011] EWCA Civ 927
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
Insert Lower Court Judge Name here\Insert Lower Court NC Number Here
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Ward
Lord Justice Patten
and
Sir Robin Jacob
Case No: A3/2010/1274
Richard MEADE Q.C. and Lindsay LANE (instructed by SNR Denton UK LLP) for the Appellant
Simon THORLEY Q.C. and Thomas MITCHESON (instructed by Hogan Lovells International LLP) for the Respondent
Hearing dates: 22 nd June 2011
Approved Judgment
Sir Robin Jacob (giving the first judgment at the invitation of Ward LJ):
We gave our judgment on this appeal on 31 st March 2011, [2011] EWCA Civ 303. We held that the patent under which Schütz was an exclusive licensee was valid and had been infringed. A day or so before the final handing down of the judgment (and after it had been supplied in draft to the parties on a confidential basis) counsel for Werit informed counsel for Schütz that a point under s.68 of the Patents Act 1977 would be taken. That point was that despite Schütz's success, because Schütz's exclusive licence had not been registered in time at the Patent Office, the effect of s.68 was that the court was precluded from awarding costs against Werit. Moreover the court could not award damages for the period prior to the amendment of s.68.
The point was obviously one of importance. Taken so shortly before the hearing it was necessary for an adjournment so that it could be properly researched and argued. This is my judgment following the full argument that we heard on 22 June 2011.
The patentee is Protechna, a Swiss company partly related to Schütz. Schütz is the exclusive licensee by virtue of a 1994 licence agreement. As an exclusive licensee, Schütz was entitled to take proceedings by virtue of s. 67 of the Act. It was necessary for the patentee to be joined as a party so as to be bound by the result. So Protechna has indeed been a party throughout the proceedings but has played no part in the litigation.
The licence agreement was not registered at the Patent Office until 17 July 2008 shortly before the present action was commenced on 7 th August 2008.
In the proceedings Schütz claimed financial compensation (damages or an account of profits) for all infringing acts coupled with an injunction to restrain further infringement. The period for which compensation is sought extends from at least the date of the licence agreement down to the present day.
The Legislation
Section 68 of the Patents Act 1977 was amended with effect from 29 April 2006 by the Intellectual Property (Enforcement etc.) Regulations 2006. These were made pursuant to the powers contained in section 2 of the European Communities Act 1972 so as to comply with the Enforcement Directive (2004/48/EC).
Articles 13 and 14 of the Directive provide:
Article 13
Damages
(1) Member States shall ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement.
When the judicial authorities set the damages:
(a) they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement;
or(b) as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question.
2. Where the infringer did not knowingly, or with reasonable grounds know, engage in infringing activity, Member States may lay down that the judicial authorities may order the recovery of profits or the payment of damages, which may be pre-established.
Article 14
Legal costs
Member States shall ensure that reasonable and proportionate legal costs and other expenses incurred by the successful party shall, as a general rule, be borne by the unsuccessful party, unless equity does not allow this."
Section 68 provides:
Effect on non-registration on infringement proceedings
68. Where by virtue of a transaction, instrument or event to which section 33 above applies a person becomes the proprietor or one of the proprietors or an exclusive licensee of a patent and the patent is subsequently infringed, the court or the comptroller shall not award him damages or order that he be given an account for the profits in respect of such a subsequent infringement occurring] before the transaction, instrument or event is registered, in proceedings for such an infringement, [the court] or comptroller shall not award him costs or expenses unless –
(a) the transaction, instrument or event is registered within the period of six months beginning with its date; or
(b) the court or the comptroller is satisfied that it was not practicable to register the transaction, instrument or event before the end of that period and that it was registered as soon as practicable thereafter.
The portions in italics are the original form of s.68, those in bold the form after amendment. It was necessary to do something about s.68 to comply because Art. 13 of the Directive makes the award of damages mandatory.
The Policy behind s.68
In Siemens v Thorn Security [2009] RPC 3 at [82] Mummery LJ said:
The purpose of s 68 is to ensure that "the people who own the monopolies get on the register" per Jacob J in LG Electronics v NCR Financial Solutions Group Ltd [2003] FSR 24 at [18]; see also Molnycke v Proctor & Gamble [1994] RPC 49 at 109 per Morritt J.
In Siemens the Court went on to examine the policy underlying the provision. After considering the relevant passages form the Banks Committee (the Committee whose report lead to the 1997 Act), the Court concluded at [90] that s. 68 should be construed broadly (emphasis added):
"90. The first clue is of course the Banks Committee report. That report, which led ultimately to the enactment of the 1977 Act, is admissible on a question of statutory interpretation in relation to any implanted recommendation to show the mischief to which s. 68 is directed. It is self-evident that Parliament in adopting the Banks Committee's recommendation set out above intended s. 68 to be, so far as possible, all-embracing and not to have obvious lacunae. The strong recommendation of the Banks Committee which led to s. 68 mandates a purposive reading of s. 33(3) to give effect to the mischief it identified, if that can be achieved."
The Rival Contentions
Werit says the effect of s.68 and its amendment is:
(a) Schütz is not entitled to financial compensation for any infringement occurring prior to 29 April 2006 (the date of amendment of s.68);
(b) it is not entitled to costs at all.
Schütz says:
(a) it is too late for Werit to take a s.68 point at all;
(b) if it is not too late then it accepts that no damages are payable prior to the date of the amendment of the section but it says it is entitled to costs.
Too Late?
It is convenient to deal with this first, for if right it would not be appropriate to go further.
Werit says the Act provides a complete bar on the court's power to award costs —it deprives the court of jurisdiction to award costs. That being so it does not matter whether the point was pleaded, raised at first instance at a point when it could have been or even referred to in a respondent's notice in this court. The provision simply does not allow costs to be awarded.
Secondly Werit says even if that is not so and the point is one that ought to have been taken, it was...
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