Stays revisited: IPCom v HTC in the Court of Appeal

Earlier today the Court of Appeal for England and Wales gave an important and keenly-awaited ruling in IPCom GmbH & Co Kg v HTC Europe Co Ltd & Others [2013] EWCA Civ 1496, a decision on whether and when to stay national validity proceedings pending the outcome of European Patent Office (EPO) invalidity proceedings.  This decision, which was not available online when news of it first broke, is now accessible on the excellent (and free) BAILII database here.

Taylor Wessing LLP has prepared an unusually helpful news bulletin on this case, which is also available online with hyperlinks to citations.  It says, in relevant part, as follows:

"The Court of Appeal has today given judgment in IPCom v HTC – a case concerning the validity of a European patent due to be heard in December 2013. HTC applied for a stay of the English validity proceedings pending the outcome of proceedings concerning the same European patent at the  ...EPO. Roth J at first instance refused HTC's application .... The Court of Appeal has upheld his decision. This is the first time that the Court of Appeal has ruled on such a stay application since the Supreme Court suggested in Virgin Atlantic v Zodiac that the guidelines set out by the Court of Appeal in Glaxo v Genentech should be considered again.

In the light of this decision, it is to be expected that the considerable duration of EPO proceedings will continue to point in favour of refusing a stay of English proceedings in most cases [this blogger thinks that the trend towards refusing a stay will accelerate anyway since, as patent litigation in England and Wales becomes faster and more efficient, and case management becomes more cogent, the likely duration of any stay will be longer. Meanwhile, in the fast-moving ICT technologies in particular, the commercial life of litigated patents is likely to continue to grow shorter].

Parallel validity proceedings for European patents

The European patent system allows proceedings concerning validity to run concurrently in both national Courts and the EPO. The reasons for requesting a stay in these circumstances are plain: there is the possibility of wasted costs and/or conflicting decisions. All else being equal, it might be said to be sensible for the national Courts to wait and see what happens at the EPO where a decision to revoke a patent trumps a finding of validity in a national Court.

However, ... proceedings in the EPO typically last many years. A decision from a national Court may arrive much quicker and still provide the parties with a helpful measure of commercial certainty, despite the fact that it only applies in that particular jurisdiction.

A number of English cases have addressed what should be done when proceedings are under way on the parallel national and EPO tracks. English proceedings have often been allowed to continue, despite the risk of wasted costs or inconsistent decisions, because a final decision of the EPO is still many years away. The leading case was Glaxo v Genentech, where the Court of Appeal set out a number of guidelines, including:

"If the likelihood is that proceedings in the Patents Court would achieve [some certainty] significantly sooner rather than the proceedings in the EPO, it would normally be a proper exercise of the discretion to decline to stay the Patents Court proceedings."

The HTC stay application

Roth J applied the Glaxo guidelines in dismissing HTC's stay application at first instance. However, he allowed permission to appeal because the Supreme Court had indicated at around the same time in Virgin Atlantic that the Glaxo guidelines should be reconsidered [it's a pity that the parties in a subsequent case should be made to pay for the reconsideration of rules that was identified as being necessary in an earlier case -- but someone has to pay the price of judicial law-making]. Virgin Atlantic concerned the impact of a later revocation of a patent on an earlier award of damages for infringement, .... Their Lordships highlighted that failure to stay national proceedings could lead to injustice to a defendant ordered to pay damages for infringement of a patent later revoked by the EPO. Furthermore, national decisions were only national, whereas a decision of the EPO applied in all designated states and the potential for inconsistency, uncertainty and wasted cost through allowing national proceedings to continue was not desirable.

In upholding Roth J's decision to refuse the stay, the Court of Appeal considered each of these criticisms of the Glaxo guidelines. While recognising that the guidelines required some revision, the Court did not consider that they should be swept away altogether. In recasting the guidelines, the Court paid particular heed to the issue of potential injustice to a defendant ordered to pay damages by a national court, but proposed ways of mitigating this injustice (e.g. by requiring the patentee to undertake to repay the damages if the patent were subsequently revoked). ... [I]nconsistency and wasted cost could only be avoided altogether (or rather potentially avoided) if stays were mandatory, which was not what the Supreme Court had suggested. Rather, these factors were inherent consequences of the European patent system, which the Courts have to take account of and manage as best they can".