A Scottish Claim Construction Hearing?

Judgment was delivered yesterday by the Outer House of the Scottish Court of Session in Total Containment Engineering Ltd v Total Waste Management Alliance Ltd [2013] CSOH 135 in a matter which may be of great interest to those who love procedural rules as much as they love the substantive law.  The following note has been penned for PatLit by Gill Grassie, a partner in the Scottish IP practice of Brodies LLP (thanks,Gill!).  This is how it goes:

Under Scottish court procedure there is hearing known as a Debate, at which the issues in the case are argued on the basis of what is set out in the pleadings. No evidence is led and the focus is solely on legal arguments. A Debate can be a very effective and cost-efficient tool to decide a case quickly and finally  -- for example on grounds of lack of jurisdiction or title or lack of a relevantly made out case. 

A Debate was employed in this patent case by the alleged infringer to try to secure a dismissal of the action. It argued that the case as pleaded by the pursuer (claimant) on the meaning of the relevant claims meant that those claims did not cover the allegedly infringing equipment and methods. The defender argued that the words in the patent were clear and that their 'obvious meaning' meant there was no infringement as certain integers of the claims in suit were not dealt with in the pleadings. The pursuer's position on the other hand was that it had set out sufficient detail to give scope for a sufficiently wide interpretation of the claims such that the defender's equipment and methods would include every integer and thus infringe. They also argued that it was only appropriate for the court to reach a decision on claim construction after expert evidence was considered.

The IP judge, Lord Malcolm, in a relatively short judgment, agreed with the pursuers, essentially on the basis that it would be inappropriate to decide the meaning of the claims of the patent in this case without some evidence from the skilled man's perspective. There would be the usual opportunity to do this via expert reports, witness statements and other evidence in the lead-up to any Proof (Trial). That should cure any difficulty that there might be with provision to the defender of fair notice of the case against it. On that basis, the application for dismissal was refused and the case will proceed to Trial.

The judge did however also make it clear that in some cases it may be possible for a Debate to be used as a suitable forum to decide the meaning of claims and agree to dismiss a case. These would be where 

'the ordinary meaning of the words used in a patent is so straightforward and clear that the precise basis for a contrary interpretation must be narrated in detail on record (in the pleadings) before an inquiry (a Trial) can be contemplated.' 

Thus there should still be some scope to employ a Debate successfully to get rid of a patent action on the basis of claim interpretation alone.

One further and more general point about this decision is that it demonstrates a willingness by the IP judges to move away from the more traditional approach of insisting on very detailed pleadings which cover all angles to allow a pursuer to proceed to a Trial with evidence etc. This approach is encouraged by the the recently revamped Scottish IP Court management rules. There is much more scope now to rely upon evidence to enlarge upon what is stated in the written case which is a potential benefit. It will tend to speed cases up and will lend itself to costs savings. As long as there is, at the same time, a means to ensure that there is fair notice given of the case to be made at Trial it seems a sensible approach to take to the issue of patent claim interpretation and generally in IP cases as a whole.

Scottish solicitors recommend keeping jurisdiction to litigate patents

On Wednesday the Law Society of Scotland issued a statement concerning the future of patent litigation in Scotland. Bear in mind the fact that Scottish patent litigation is subject to two layers of uncertainty: one relates to the impact of the Unitary Patent Court system within the European Union as a whole, while the other relates to whether Scotland's contemplated departure from the United Kingdom would automatically require the country to apply for membership of the European Union.

The statement runs as follows:

"The Law Society of Scotland has today, 22 May, recommended that the Court of Session retains its jurisdiction over patent cases under the new Community Unitary Patent system.

The Intellectual Property Bill, once enacted, will pave the way for establishing a Unitary Patent Court system in the UK. The Society considers it important that Scotland is allocated one of the (up to four) possible local divisions of the Court. This will ensure that businesses operating in Scotland are not unduly disadvantaged by no longer having a local option to enforce or defend their rights.

Gill Grassie, member of the Law Society of Scotland's Intellectual Property Committee, said:

"The Court of Session currently has jurisdiction in Scotland over cases under existing patents. If it were not to have this for the new Unitary Patent, then litigants in Scotland would no longer have an effective local option available to protect their patent rights - they would instead have to litigate or defend their position elsewhere in the UK or Europe. This could significantly increase costs for those litigants. Designating the Court of Session as one of the UK local divisions of the Unitary Patent Court would ensure that patent litigants who operate in Scotland are not unduly disadvantaged"".

Thanks go to Kate Manning for supplying this information.

Scottish springboard leads to account of profits

PatLit sends its most grateful thanks to the invaluable Susan Snedden (Associate, IP & Technology, Maclay Murray & Spens LLP) for the following note on a piece of Scottish litigation that raises extremely interesting issues relating to relief for infringement: Bayer Cropscience KK v Charles River Laboratories Pre-clinical Services, Edinburgh Limited and Albaugh Inc [2010] CSOH 158, a decision of the Scottish Court of Session to the effect that springboard relief for patent infringement is available in terms of an account of profits as well as damages [note: the "springboard" effect is caused by an infringer using his infringement as a springboard to leap ahead of other traders by entering the market before them]. Previous UK springboard relief authorities related only to damages/injunctions. Says Susan:

"This case provides, for the first time, useful confirmation that a springboard claim can be made in respect of an accounts of profits as well as damages, under the Patents Act 1977, s.61(1)(d). It also demonstrates that the Scottish Court of Session’s debate procedure can be used effectively to focus the issues in dispute and thus save costs. For example, had the defender’s argument been successful, there would have been little benefit in incurring the expense of a full trial as no remedy would have been available.

The parties to the dispute were Bayer Cropscience (the pursuer/claimant), Charles River Laboratories (the first defender/defendant) and Albaugh Inc (the second defender/defendant). Bayer was the proprietor of a European patent which expired on 31 March 2006 and the equivalent US patent, which expired on 21 January 2006. Bayer never sold the patented product on its own, and only once incorporated it into an end product. Albaugh was a competitor of Bayer Cropsciences.

Around a year before expiry of the patents, Albaugh applied to the US Environmental Protection Agency for registration of an insecticide containing the patented product as its active ingredient. The EPA required chemistry test data before it could register the product, so Albaugh instructed Charles River to carry out the necessary tests and arranged for the patented product to be imported from China to Scotland for this purpose. Albaugh did not dispute that these acts amounted to patent infringement. However, Albaugh's position was that the products were not placed on the market until the expiry of the European Patent in April 2006.

Charles River settled their involvement in the case extra-judicially.

A debate (this is the term for a Scottish preliminary hearing on a point of law) then took place at which Bayer argued it should be entitled to a springboard account of profits for Albaugh’s sales in 2006, 2007 and 2008. Albaugh argued that the court had no power to order a springboard account of profits. Albaugh's profits were derived from lawful transactions, namely the post-expiry sales, rather than the infringing acts. The infringing acts were not commercial transactions capable of generating profits. They were no more than a precursor to profit- generating activities which all occurred after expiry of the patent.

In response, Bayer noted that Albaugh did not dispute that the purpose of the infringement was to allow it to enter the market earlier than it otherwise would have done on expiry of the patent. Bayer pointed out that Section 61(1)(b) of the Patents Act 1977 specifically allows the Court to order an account of the profits, "derived by [the infringer] from the infringement." In this case Albaugh had generated unfair profit which, but for the infringement, would not have been generated. The fact that the profits were achieved after the expiry of the patent was of no significance. The matter should go forward to a Proof (full trial) to give Bayer an opportunity to prove that the profits were derived from the infringement.

Lord Malcolm reviewed the case law in respect of springboard damages/injunctions. In his view the authorities supported the validity of Bayer’s claim for an account of profits. The basic purpose of the remedy sought by Bayer was to deprive Albaugh of unfair or unjustified profits. Albaugh deliberately used the invention to obtain an unfair advantage over its competitors and then exploit it for financial gain. The fact that the sales were lawful acts did not automatically sever the chain of legal causation between the infringements and the profits.

The matter will now go to Proof (trial). It will be interesting to see what evidence Bayer leads to support its claim that the profits not just in 2006 but also in 2007 and 2008 derived from the infringing acts. Their position is that, had it not been for the infringement, Albaugh would not have been ready to launch on to the market until the end of 2006 and also that, as a result of its early entry into the market place, Albaugh achieved enhanced levels of sales in 2007 and 2008".

Thanks so much, Susan.