Tuesday, 28 April 2015

Disclosure of commercial licences: a new strategy for dealing with non-practising entities?

From Ian Wood (Charles Russell Speechleys LLP) comes a hot-off-the-press judgment which, Ian suggests, may be a new weapon to use against patent trolls.  Ian explains:
In what the judge, Arnold J, himself characterises as unprecedented, a company accused of infringing a patent (Big Bus) applied to the High Court for the owner of the patent (Ticketogo) to disclose the commercial contracts it had with existing licensees under the patent before court proceedings were brought. It sought this information in order to assess whether it should defend the claim (which would be expensive) or to seek a commercial settlement in advance of legal action. The judge agreed that the owner of the patent (Ticketogo) should disclose the licence agreements.

The Big Bus Company operates open-top bus sightseeing tours. Ticketogo has a ticketing system patent which provides a method of issuing tickets over the internet using a barcode in an image file format. Ticketogo does not conduct any business except patent licensing. Who are we to say that Ticketogo might be a patent troll?

In October 2012, Ticketogo contacted Big Bus notifying it of the existence of the patent, saying that Big Bus’s ticketing system infringed its patent and offering to license the patent to Big Bus if commercial terms could be agreed. Big Bus denied that its ticketing system infringed the patent.

Ticketogo’s lawyers responded by referring to the high costs involved in challenging the validity of a patent and listing other licensees who, they (i.e. Ticketogo’s lawyers) said, “presumably decided after due consideration not to attempt a challenge to the validity of the patent.”

All went quiet for a while but, in February 2015, new solicitors instructed by Ticketogo (Taylor Wessing) wrote again saying that Ticketogo believed that Big Bus, “requires a licence of the patent. Many others have decided to take a licence,” and attached a current list of 43 licensees. To many, including the judge, this would appear that Ticketogo was threatening litigation -– and the licences were relevant to its claim.  Accordingly, Big Bus sought pre-action disclosure (under suitable confidentiality provisions) of the patent licences previously granted by Ticketogo in order to help it quantify the value of the claim for patent infringement that could be brought against it by Ticketogo. Big Bus said that, because of the potential irrecoverable costs it might incur even if it was successful in any patent infringement proceedings, it was willing to resolve the dispute through a commercial agreement. However, to do so it needed first to establish the value of Ticketogo’s claim.

Big Bus applied to the High Court of Justice (Patents Court) asking for Ticketogo to be required to disclose commercial details of the licences it had granted to others using its patent in advance of infringement proceedings that Ticketogo might pursue against Big Bus.   The judge decided that this pre-action disclosure should be made.
The case is The Big Bus Company v Ticketogo Ltd [2015] EWHC 1094 (Pat). It's not yet on BAILII but should be. Ian Wood acted together with David Fyfield on behalf of Big Bus; Taylor Wessing acted for Ticketogo. 

9 comments:

Anonymous said...

Now on Bailii: http://www.bailii.org/ew/cases/EWHC/Patents/2015/1094.html

Roufousse T. Fairfly said...

1/3:
This case is quite interesting!

Who are we to say that Ticketogo might be a patent troll?

I wouldn't dare say that, but I might whisper it very loudly into a friend's ear...

Is "pre-action disclosure" the same thing as "discovery"?

The Companies House documents reveal a few interesting details, if you shell out just the price of a cup of tea and crumpets.

The UK company No. 07603881 called "Ticketogo Ltd." was incorporated on 24.11.2011, and initially gave what appears to be a residential address in the village of Marsworth (population 741) in Buckinghamshire. Eighteen months later they apparently moved to the premises of the London accountants who prepared their statements, where they remained until 2014. They currently reside in the Broadgate Tower near the Liverpool Street railway station in London.

There are two directors, Messrs. Robert David McIntosh and Zulfiqar Khan, who initially split the stock in a 60:40 ratio amongst themselves respectively. The ownership was later readjusted between the shareholding directors in equal proportion. (From my painfully earned experience, fifty-fifty ownership is a deadly sin in a small business, unless the partners have a bulletproof shareholders agreement with functional anti-deadlock clauses -- but that's another story.)

GB2391101B was initially filed as an international application under the PCT on 09.05.2002 by a Delaware corporation called "Entertainment International Ltd", and granted in the national phase to the same firm by the IPO on 20.10.2004.

Ticketogo was formed many years after the patent was filed and granted. In addition to the licensing information demanded in the "pre-action disclosure", I would have asked to see the evidence showing how the chain of title to GB2391101B was acquired from the Delaware company by the newer British one. I would extend the investigation as far as inquiring how the invention was acquired from the three inventors, even if one of them is Mr. McIntosh.

Hopefully the proper ownership transfer paperwork was prepared and filed before this campaign was launched...

It would be worthwhile to investigate such details, as the PCT application claimed the priority of a GB application 0111286 filed by a company called "Entertainment International Ltd". However, this isn't the same corporate entity as the Delaware company, since the priority document clearly states on page 2 that the country of incorporation is the United Kingdom, with an address in... Marsworth. Is this one or two entities?

Roufousse T. Fairfly said...

2/3

EPO jurisprudence does accept a change of corporate form as a mere change of name, but the only jurisprudence I'm aware of simply acknowledges German national corporation law (namely the Umwandlungsgesetz (UmwG), which explicitly states that a KG can metamorphose into an Aktiengesellschaft or a GmbH, and vice-versa.

The present situation seems to be different, and also raises questions about the validity of the priority claim.

There was an Entertainment International (group) Limited", Company No. 06336982, but it was incorporated only in 2007 and wound up in 2011, but I can't otherwise find a British Entertainment International Ltd. operating at any time.

As I understand EPO case law, which probably corresponds to the British doctrine, the transfer deed must be executed before the second application is filed, as a retroactive cannot correct the matter of fact that identity of applicants was lacking between the first and second applications.

Ticktogo's letter contains the following statement:

For your client’s information - and in the spirit of openness with which this correspondence is being conducted - the closest prior art document of which our client is aware was found by the UK Intellectual Property Office’s search during the prosecution of the Patent. It was the British Airways patent application, no. GB2361570 [...]. The UK IPO’s objection to the grant of the Patent based on this prior art citation was overcome.

GB2361570 was published after the application's priority date, but before it's filing date, and can only be cited unter Section 2(3) of the Patent Act 1977, which is the UK counterpart to Art. 54(3) EPC. It was a rather trivial feat to overcome any novelty objection based on this document, as it prima faciae lacks many features recited in the independent claims.

Roufousse T. Fairfly said...

But if priority is denied, then obviousness can be argued on the basis of this document. There however is much better prior art available. WO0190844 is in my opinion a bullseye, but it too can only be used in the case of invalid priority.

KR20000024508 and EP1014318 are both published before the claimed priority date. The KR document is quite good, as it seems to generate a ticket in image form like it is claimed according to automatic translation: Barcode tickets granted and needs to contain information for your application details being fabricated as a graphic file.

The EP document is even better, even though the terminology isn't the same - replace "bar code" by "two-dimensional code":

[0029] The ticket image data 21 shown in FIG. 3 are generated from the ticket issue request data referring to the data base 18 during the process in Step S11 shown in FIG. 2. On this ticket, a kind of ticket 31, a place 32, a data and time 33, a reserved seat number 34, a charge 35, a serial number 36, a ticket issuer 37 and a logo mark that are required for tickets for a normal concert are printed. These data are also printed on the stub of the ticket. The security data 22 shown in FIG. 4 is generated from the user identification data and the ticket issue request data during the process in Step S10 show in FIG. 2. This security data 22 is used for the genuineness judgement to check whether a ticket was forged or altered. In this example, such data as a two-dimensional code data 39, a serial number for inquiring 40, a ticket issuer 41, a logo mark are printed on this ticket. Letters and figures are also expressed in binary image.

Looking at the balance sheet, Ticketogo War had in 2014 chest of 260k£ for shaking down companies. Where does it come from? From the director's pockets? There doesn't seem to be any other asset in the company, except the patent which was valued at 2,848,527£. How did they come up with that figure? According to the footnotes:

Intangible fixed assets comprise one UK patent (number: GB2391101B) held regarding the development of an electronic ticketing system. A revaluation was carried-out on 30th April 2014 due to a material change in the level of royalties received by the Company (previously £nil). The potential to assert patent rights for a look back period post expiry has not been assessed.

[...]
(l) Intangible Assets (including goodwill)

Intangible assets with a finite useful life such as licences and patents are valued over the estimated
useful life of the asset. Any valuation is based on projected future cash flows (which in turn are based
on historical revenues derived from the asset, discounted at a rate of 3% so as to arrive at a net present value. A revaluation is performed when there is a material change in outlook for the asset, such as a
change in projected future cash flows.


The patent had seven years of potential life left as this was written, so they might be hoping to cash about 400-500k£ a year on the average. I think their odds would be better at Ladbrokes...

In the case some irate customer comes out of the bush to insult me, just remember, I'm only a kibitzer. ;-)

MaxDrei said...

If I am remembering the name Ian Wood aright, he has decades of experience as a patent litigator. I remember him as a generous and welcoming party host in Lincoln's Inn Hall, perhaps 30 years ago. Good on him, and his client, for running this defence. I hope the smart comments from Roufousse here ijn this thread will give more power to his elbow.

The Paris Convention priority point is tasty. Not least because, in the days long ago, when the subject patent application went through its Paris year, few were alive to the threat it poses now.

And, having read the thread above, the thought comes to mind, who would you rather pay, to do a competent patentability search, Roufousse or the UK IPO?

Anonymous said...

MaxDrei

The UKIPO was not paid to do a complete patentability search on this case as it came from a PCT application searched by the USPTO.

Anonymous said...

It may be more than the cost of afternoon tea, but you'd think it would be in someone's interest to stump up the £200 to get the UK IPO to issue an opinion based on the above, with the possibility that it as amended or revoked. So much for the high cost of challenging the validity of the patent.

MaxDrei said...

Good point. You would think so, wouldn't you.

So why has neither side asked the UK IPO to opine on validity? I can think of three reasons:

1. To do so didn't occur to them
2. They are reluctant to lay their best evidence on the table
3. Neither side is confident of getting the opinion it wants.

If it is 3. that is an indictment of the state of the law of patent validity in Europe. Not enough legal certainty yet.

Anonymous said...

UKIPO may decline to give an opinion if UK proceedings are already underway.