Friday, 28 January 2011

Technology agreement is "intellectual property litigation" for PALs, rules court

"High Court Clarifies Scope of Patent Attorney Litigators' Rights" is the title of an item posted earlier this week on the website of Hogarth Chambers.  Hogarth is well placed to comment on the case in question since it furnished barristers for both sides (Richard Davis acted for Atrium, while Michael Hicks and Jeremy Reed acted for DSB).  This note briefly reviews a decision last Friday of Mr Justice Lewison (Patents Court, England and Wales) which, the authors say, is believed to be the first judgment on the scope of the right of Patent Attorney Litigators (PALs) to conduct litigation in the High Court.  They explain:
"Under article 3 of the CIPA Higher Courts [Qualifications] Regulations, PALs have the authority to conduct “intellectual property litigation” which is defined as “any matter relating to the protection of any invention, design, technical information, or trade mark, or similar rights, or as to any matter involving passing off or any matter ancillary thereto.”

The proceedings concerned a worldwide technology transfer agreement in which DSB sold Atrium a bundle of ‘technology’. That ‘technology’ comprised patent applications, information and hardware. The agreement (although a sale and assignment, not a licence) provided for payment of deferred consideration in the form of a ‘royalty’ on any products sold by Atrium which incorporated the technology and a higher royalty if the product fell within the claims of the transferred patent rights. Atrium sold a product on which they claimed no royalties were due, and commenced proceedings in England seeking declaratory relief to that effect. DSB counterclaimed for payment of the royalties. Thus the main issues for trial would be whether, for the purposes of the contract, C-QUR incorporated the technology and whether C-QUR fell within the patent.

Atrium’s case was conducted by a PAL and the question arose as to whether he was entitled to act under the CIPA Regulations. There were potentially adverse consequences if the PAL was not entitled to act, including in relation to legal professional privilege and costs. In light of this Atrium applied to the court for a declaration that the ongoing proceedings did in fact fall within the scope of a PAL's authority to conduct intellectual property litigation.

Atrium argued that the case fell clearly within the regulations. It contended that it was part of a patent attorney’s day-to-day business to advise on the exploitation of IP and that was what this case was all about.

DSB’s stance was that the regulations were limited to proceedings relating to the protection of IP rights, and that article 3 should be construed in a manner that reflected that limitation. DSB contended that the present dispute was essentially about breach of contract – in particular, whether C-QUR incorporated certain features and technology, within the meaning of the contractual provisions, and as such it did not concern the “protection” of the underlying invention or technical information.

Atrium responded that if one looked at the strict wording, the article was not limited to the protection of patents and confidential information but the broader term ‘protection of inventions’. This would cover patents and ‘protection of technical information’ which would include protection by way of an obligation under a contract to protect confidential information. Moreover, contractual issues were often central to various matters which patent attorneys conducted under the 1977 Act such as entitlement proceedings and it cannot have been the intent of Parliament to deprive patent attorneys of privilege (which is worded similarly to article 3) when conducting such proceedings.

The judge accepted that the scope of article 3 was somewhat fuzzy at the edges, and held that it was appropriate for the PAL to have brought the matter to court for clarification.

The judge ruled in Atrium’s favour that the proceedings fell within article 3 and so could be conducted by a PAL. The judge held that IP rights could be protected and exploited in different ways – the IP rights might be exploited by the owner himself, they might be licensed, or they might be sold. As such, a royalty dispute would concern the “protection” of IP rights for the purposes of article 3, and the fact that the present dispute concerned deferred consideration was a distinction without a difference. The issue for the court was essentially the same, and Parliament could not have intended that PALs could conduct litigation for one but not the other. The court declined to decide a point that arose in argument, namely whether copyright claims fell within the scope of article 3.

The judge agreed that the effect of s.190 of the Legal Services Act 2007 was that the scope of privilege was coterminous with the scope of the authority to act under article 3.

The judge held that, as the application was primarily a matter as between the PAL and the court (as opposed to a normal inter partes application), there should be no order as to costs".
The full text of this decision has not yet been made available online on the BAILII website, so you should contact the authors at Hogarth for further particulars. There does not appear to be any information concerning this decision on the CIPA website.

PatLit thanks Peer Watterson (Withers & Rogers LLP) for drawing this item to its attention.

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