Toy beads in court: attempt to get judge to examine merits in interim proceedings fails

Epoch Co. Ltd v Character Options is a decision of the England and Wales Intellectual Property Enterprise Court (IPEC) of 29 October, courtesy of Judge Hacon. Being extempore, the judgment has not been uploaded to BAILII but was potted by the subscription-only Lawtel service.

This dispute revolved around Epoch's patent for a fusible bead toy in which beads could be first arranged and then fused together to form a specific design. CO, a company that imported bead toys from Australia and sold them on the UK market, placed a new type of bead toy on the market which, Epoch said, infringed its patent. Epoch sued for infringement and sought an interim injunction against CO, who alleged that the patent was invalid.

CO, relying on Series 5 Software Ltd v Clarke [here], submitted as a preliminary point that the court should investigate the merits of the case as a whole on the evidence available at the interim hearing. No, said Epoch: there was a serious issue to be tried and it would suffer irreparable harm without the injunction. This was because

• the lifespan of individual product designs was short, so CO's products were likely to cut short any interest in Epoch's; 
• one of CO's products had been under scrutiny in 2007 for containing harmful chemicals; if its products remained on the market there would be a risk of them damaging the reputation of that type of product generally; 
• there was brand loyalty for Epoch's products, and if Epoch succeeded at trial and the CO's products came off the market, customers would buy Epoch's beads but could not match the colours to what they had left of CO's, thereby damaging the image of Epoch's products.

Judge Hacon refused the application for interim injunctive relief. In his view

* The approach adopted in Series 5 Software had not been endorsed by other courts. While the American Cyanamid principle [which requires the court to look at the balance of convenience, or relative inconvenience, of the parties ahead of the full trial] did not prevent some weight being given to the merits, there should not be a mini-trial, especially where interim relief could influence the commercial outcome. The court would therefore apply American Cyanamid in the usual way.

* There was a serious issue to be tried as to whether Epoch's patent was valid, either because it lacked an inventive step or was unpatentable as a merely an aesthetic creation under the Patents Act 1977 s.1. The court would not however take a view at the interim stage in the absence of full legal argument on the meaning of "aesthetic creation".

* The likelihood of irreparable harm being caused to Eppoch if no injunction was ordered was low, as

• there was no evidence of overlap in the designs, and it was somewhat speculative to suggest that the lifespan of a popular Epoch design would be cut short by CO's activities, although it was possible; 
• there was no evidence that CO's products were dangerous; CO's evidence was that the beads were now formulated with a bitter taste to prevent their being swallowed; the evidence showed that there was a lively interest in the products; any damage to Epoch's reputation had occurred in 2007 but had disappeared; 
• even if there were difficulties in matching the beads as suggested, customers would recognise that it was due to the difference in brands -- there would be no damage to the image of Epoch's products. If there was brand loyalty, on its face that was a reason for not granting an injunction, This was because, if an injunction was granted but CO succeeded at trial, it was liable to find it difficult to re-enter the market. 

* There were only two parties on the market in the UK, and there was a strong inference that, to the extent that CO sold its products, Epoch lost sales on a 1:1 basis. Therefore if no injunction were granted and Epoch succeeded at trial, it should be able to assess its lost sales and calculate appropriate damages with reasonable precision. The balance of irreparable harm favoured not granting the injunction.

Splitting trial between IPO and court "unsatisfactory and wasteful"

Angle Ring Ltd v ASD Westok Ltd is an extempore ruling of Judge Richard Hacon, sitting earlier this week in the Intellectual Property Enterprise Court (IPEC), England and Wales. The decision is briefly noted on the Lawtel subscriber-only service.

This was an dispute involving the ownership and validity of three patents in which the defendant Westok applied for summary judgment in respect of Angle's patent ownership claim.  Angle, the first claimant, asserted that Westok had never been the true inventors of the patents and had at all times known, or had reasonable grounds to know, that the second claimant was the true inventor. Although the IPEC would be able to deal with lack of inventive step or novelty at trial, the claimants failed to make a pro forma application to the UK Intellectual Property Office (the IPO, which has the initial jurisdiction to deal with claims relating to ownership of patents and patent applications) to have the matter transferred to the IPEC, leaving an issue as to whether the court had jurisdiction to deal with entitlement.

Westok submitted that there were no reasonable grounds for it to have known that the second claimant was the true inventor, and that the court should determine that there was no real prospect of concluding that it must have known that it was not entitled to the patents.

Richard Hacon refused the application. In his view:

* The allegation that Westok had had reasonable grounds for knowing that the second claimant was the true inventor was irrelevant. It was fair to infer from the pleading that the claimants had alleged that Westok had known that it was not entitled to the patents, and the court would have to determine whether Westok knew that it was not so entitled.

* It was not appropriate to go through the evidence in a mini-trial of whether the claimants' case was unarguable; it had been pleaded sufficiently and should go to trial.

* The claimants would find it difficult to adduce further evidence if it turned out that the existing evidence did not support its case that Westok had had the relevant knowledge, and Westok would therefore succeed at trial on that point.

* The court ought to exercise its inherent jurisdiction in order to deal with entitlement at trial. It was artificial to distinguish the matter of lack of inventive step or novelty and leave entitlement to the IPO. That would be unsatisfactory and wasteful.

IP litigation in the UK: on the increase, thanks to IPEC

[Note: a slightly longer version of this post appears on yesterday's IPKat weblog, here]. Back in March, PatLit posted "Patent litigation in England and Wales 2007-2013: is it a predictor for UPC behaviour?", here, having received from Luke McDonagh some fascinating information and thoughts relating to current IP litigation research in the UK.  This has now been followed by the publication of a 53-page UK Intellectual Property Office-commissioned report, Evaluation of the Reforms of the Intellectual Property Enterprise Court 2010-2013, published on Wednesday and accessible via this link. As Luke explains:

In this report, which I co-authored with two economists, Christian Helmers and Yassine Lefouili, our task was to examine the impact of the 2010­-2013 reforms undertaken at the former Patents County Court (PCC), now the Intellectual Property Enterprise Court (IPEC). The primary aims of the reforms were to streamline litigation procedures and reduce litigation costs, and thereby increase access to justice for IP litigants, particularly for individual claimants and SMEs who had previously found the PCC an expensive and unwieldy litigation venue. The reforms introduced a number of changes -- staggered over the period 2010-­2013 -- including a cap on recoverable costs and damages, a reduction of the length as well as complexity of court actions, and the reconstitution of the PCC -- a county court -- as the specialist IPEC within the Chancery Division of the High Court.

In our report we assess the reforms both quantitatively and qualitatively. In our quantitative case counts we find that there has been a large increase in the quantity of IP cases filed at the IPEC post-reforms, and via a comparative study of IP cases at the High Court (HC) and Patents Court (PHC) we show that with the exception of patent cases, there has not been a corresponding increase in cases at the higher level.

We find quantitative and qualitative evidence that the costs cap and active case management by the IPEC judge have been the most influential reforms with respect to the large increase in cases filed at the IPEC post-reforms. We also note that case filings by SMEs have increased substantially following the reforms, fulfilling one of the key aims of the reforms. Importantly, we find that this effect is driven by changes at the extensive (more claimants) and intensive (more cases per claimant) margins of litigation behaviour at the IPEC. Finally, we provide a theoretical model that allows us to gauge the effect of the reforms on those IP disputes that never reach a court. Our theoretical predictions suggest that in addition to encouraging more IPEC case filings, the reforms have had the effect of increasing the quantity of out-of-court settlements as well.

This all suggests that the experiments in reformatting, restructuring and rebranding have paid off. The period in question stops before the Small Claims track started gathering its current momentum, so there may be even better news to come when use of the IPEC is next reviewed.

Inventive step: is 'long felt want' still worth arguing?

VPG Systems UK Ltd v Air-Weigh Europe Ltd [2015] EWHC 1862 (IPEC), is a tidy little decision of Judge Richard Hacon, sitting in the Intellectual Property Enterprise Court, England and Wales, on 1 July, where the court found that VPG's patent for a device for indicating to the driver of a commercial vehicle that load limits for that vehicle had been reached or exceeded was invalid as lacking an inventive step [this is the second blogpost on issues arising between these parties: here's the first].

Of particular interest to this blogger is the judge's comment at [66]:

"I would only add this. No argument of long felt want was run by VPG. Superficially one might have expected an argument of that kind in these proceedings. The evidence from the experts suggested that this was a field in which the performance of inclinometers and accelerometers was advancing at quite a rapid rate in the period leading up to the Patent's priority date. Had long felt want been run, it is possible that it was around 2006 when such advances made a system of the type claimed in the Patent commercially attractive. As it is, long felt want was not enrolled to assist VPG's case so the change in performance of inclinometers is neutral".

'Long felt want' is an argument that had its heyday in the previous century, when a patent's inventive step (a.k.a. lack of obviousness) was something that was more often than not established by the application of rules of thumb which established that an invention was not obvious if, e.g., there had long been felt to be a want of it but that want had not been hitherto satisfied, or that it was obvious if it consisted of the application of a known principle for a known purpose or was reasonable for the person skilled in the art to try it. However, after (i) the Court of Appeal in Windsurfing International Inc v Tabur Marine (Great Britain) Ltd [1985] RPC 59 created a formula that looked specifically at the difference between the alleged patentable invention and the prior art and (ii) advances in computer storage, retrieval and search made the prior art far more accessible than had previously been the case, reliance on rules of thumb -- including 'long felt want' -- appears to have declined.

This is very much a personal impression, but this blogger feels that the very fact that a party raises 'long felt want' as an argument that its patent is not obvious is a flag being waved in the direction of the court that the argument in favour of there being an inventive step is a really weak one. A search of patent cases on the BAILII database suggests that the words 'long felt want' have scarcely been uttered by any British judge over the past five years.

Adding more infringing products at the stage of assessing financial compensation: can it be done?

AP Racing Ltd v Alcon Components Ltd [2015] EWHC 1371 (IPEC) is a decision of Judge Hacon, sitting in the Intellectual Property Enterprise Court (IPEC), England and Wales, on 15 May, relating to infringement of a patent for calipers. This decision established something that, in theory, we may well have assumed anyway -- but it's good to spell it out to patent litigants. The message? That, as a general rule, in cheap-and-cheerful IPEC proceedings a patentee whose patent has been shown at trial to be infringed will not be entitled to litigate a broader range of infringements in an account of profits, or in an inquiry as to damages, than those included in his original infringement claim. However, as an exception to that general rule, where a patentee has no reason to know of those other infringements until after the case management conference, the most expeditious way forward is for the court to consider further allegations in the inquiry or account -- if this can be done without having to deal with additional evidence.

In making this statement of general principle, Judge Hacon stated that the patentee is under no general duty to exercise reasonable diligence to ascertain whether he has a potential further cause of action against the defendant. However, he added, a lack of diligence where the further claim would have been apparent to a reasonable claimant early in the proceedings, if he had only exercised reasonable diligence, could tip a claimant's attempt to deal with further infringements at the remedy stage into the category of abuse of process -- though it wasn't an abuse of process in this instance.

Late references to prior art: how to reach a sensible solution

VPG Systems UK Ltd v Air-Weigh Europe Ltd was an extempore ruling of Judge Hacon yesterday, sitting in the Intellectual Property Enterprise Court (IPEC), England and Wales. It will never hit the law reports, but at least it was noted on the Lawtel subscription-only service. It's one of those small but revealing cases that shows how a low-tier court goes about its unglamorous daily business of resolving disputes as efficiently and economically as possible, given the obstacles facing the judge (otherwise known as the parties).

In short, this was all about a pre-trial case management conference in a standard infringement claim where the defendant alleged invalidity. The lists of issues had been determined at a case management conference, following which the defendant sought to include reference to a new item of prior art. Although that item of prior art had not been referred to in the original list of issues, it was not one that surprised anyone since it had been mentioned both in the pleadings and in evidence.

The defendant submitted that its expert had not realised, before the case management conference, that certain documents relating to the new item of prior art were available. It also argued that, since the relevant item of prior art had been referred to in the pleadings and in the evidence, in that sense it was already part of the material before the court.

Judge Hacon granted the defendant's application.

First, the bad news for the applicant: the primary difficulty for the defendant was one of the provisions of the Civil Procedure Rules, CPR r.63.23(2), which deliberately made it difficult for parties to add material into the case after the first case management conference. What's more, the fact that the expert had not realised that documents relating to the relevant piece of art were available before the first case management conference did not constitute an exceptional reason that could justify the proposed amendment.

What about the good news? Given that the prior art had been referred to in the pleadings and in evidence, it could not be said that the defendant was seeking to submit new material into the case; rather, it was seeking to rely on the new material as a specific item of prior art.  This being so, r.63.23(2) did not of itself provide a barrier to allowing the amendment -- and there wasn't any other barrier to allowing the specific item of prior art to be added into the list of issues. Plainly it was an item of prior item with which the patentee was familiar, it having been referred to in the pleadings and in the evidence, and therefore it had to be something that was well within the patentee's contemplation, and there was no real prejudice to the patentee in allowing the defendant to rely on it.

Now for the qualification: since its application would be allowed, the defendant would not be permitted to put in any material relating to the item of prior art that was not already before the court in the form of disclosure or evidence.

This seems to be a neat solution, protecting the interests of both parties and enabling the court to have a better stab at either invalidating or affirming the status of a patent that might well be of interest to others in the same market.

Litigating in IPEC: a hands-on course

While competition between the various IP professions in England and Wales remains brisk, it's good to see how they cooperate in both running patent litigation courses and in making them available to those who wish to take advantage of them. An example of this cooperation is "Intellectual Property Enterprise Court – Use your rights!" This is a Chartered Institute of Patent Attorneys (CIPA) course which takes place first on Tuesday 9 June 2015 at the headquarters of CIPA, 95 Chancery Lane London WC2A 1DT and thereafter from Thursday 25 June to Saturday 27 June 2015 at Missenden Abbey, Great Missenden, Buckinghamshire HP16 0BD. What's this course all about? The CIPA website explains:

With the growing popularity of the IPEC amongst SMEs, and its more EPO-like procedures, patent attorneys are starting to take the opportunity to offer competitive litigation services. The aim of this course is to provide experienced patent attorneys (3+ years PQE) with an understanding of the procedures of the court by running a patent case study from issue to trial.

This course, which was run successfully in 2011 and 2012, will give you the tools to conduct proceedings in IPEC, either alone or with a barrister – or at the very least give you the confidence to look after your client through the litigation process. This time, we also hope to provide direct experience of the IPEC in action by arranging for at least some attendees to act as marshals in the court after they complete the course.

The course starts with an introductory day at CIPA Hall followed by a residential “long weekend” (Thursday lunch time to mid-Saturday pm). This takes place at conveniently situated Missenden Abbey, in the Chiltern Hills. Much of the time will be spent in groups of four or five working on the case study, under the supervision of a tutor. There will also be plenary sessions dealing with procedural law, case management and practical aspects of running a case and preparing for trial. There is nothing like a “long weekend” course, with hands-on experience for delivering the required levels of competency and confidence to act.

Further details of the course, which is being run by Vicki Salmon (IP Asset) and Richard Davis (Hogarth Chambers), can be found here. The contributions of Vicki and Richard will be augmented by the contributions of others, drawn from the ranks of the nation's IP barristers, solicitors and patent attorney litigators.

While this course is designed for Fellows of the CIPA, a limited number of places are available for solicitors and barristers. The course is limited to 30 delegates, to ensure that everyone gets the opportunity for hands-on learning.  The cost of the course includes accommodation at Missenden Abbey together with meals. CPD: 16+ hours Cost: Members: £1,560 (£1,300+VAT), Non-Members: £1,920 (£1600+VAT)

Security for costs: a sensible approach

Guardian Barriers IP Ltd v Global Vessel Security, decided by Judge Hacon on 22 September in the Intellectual Property Enterprise Court (IPEC), England and Wales, is a useful little decision on security for costs. Again, this is an extempore ruling which has been picked up only on the increasingly useful Lawtel subscription-only case note service.

In short both parties, which sold anti-piracy devices for ships, were involved in a patent dispute [somewhat annoyingly Lawtel identifies them only as X and Y: it would cost little but add substantially to the value of the note if the parties' real names were used].  In these proceedings X sought an order for security of costs against Y to the tune of £50,000 [which happens to be the amount at which IPEC costs are capped]. Y's published accounts showed that they only had assets of approximately £1,000 and X, citing an email written by Y's solicitor which stated that their funds were limited, was concerned that, if Y lost the action, it would be unable to pay costs to the sum in question.  Y resisted the application for the order for security for costs, showing documents which, they said, showed prospective orders worth £4 million.  Since, if they lost, they wouldn't be ordered to pay X's costs until after the trial -- which was likely to take place in over a year's time -- they would by then have the funds to do so.  Meanwhile such money as they did have was needed for business growth.

Judge Hacon made the security for costs order.  In his view the prospective orders were not firm orders: most of Y's evidence consisted of documents showing that buyers were interested in the product, but there was no confirmation that they were actually going to place orders. What's more, even if Y did sell £4 million worth of products, there was no guarantee that they would make a profit. Looking at the firm and non-speculative side of things, on the evidence Y would not be in a position to pay X's costs if X succeeded at trial so it was appropriate to make an order.  However, security would be fixed at £17,000 (around one-third of the sum for which security was sought), this being the sum that had already been spent by X.  The issue would be reassessed at a case management conference.

It's always interesting to see how issues like this are handled, particularly since the need to give security for costs is frequently cited by SMEs as a reason for shying away from patent infringement litigation even when it is their own patent that is being allegedly infringed and they have received advice that their case is a strong one.  So far as one can see from the skeletal account of the dispute, Judge Hacon's decision here looks like a good, commonsense one.

Dividing the costs: is there an interface between justice and surmise?

Baxter Healthcare UK Ltd v Fresenius Kabi is a 17 September ruling of Judge Richard Hacon in the Intellectual Property Enterprise Court, England and Wales, delivered extempore on 17 September. This blogger found the case noted on Lawtel's subscription-only service.

In March 2014, without issuing a letter before action, Baxter issued patent revocation proceedings against Fresenius, alleging lack of novelty and inventive step. Fresenius did not counterclaim for infringement and in May 2014, as part of its defence, said that it would not assert the patent against Baxter. No, said Baxter in June, that wasn't good enough: it would still leave Fresenius free to sue Baxter's customers and could cause problems if the patent came into the hands of assignees. After an amendment of the pleadings was ordered, Fresenius itself applied on 1 August for unconditional amendment of the patent that whittled it down to just one claim, effectively giving Baxter everything it wanted. Baxter then sought costs up to 1 August.

Fresenius didn't see why it should have to shoulder the costs. After all, if Baxter had only written a letter before action, the parties would have resolved their differences and arrived at the same point without the need for proceedings and without therefore incurring consequent cost. Fresenius said that it would have offered Baxter a contractual undertaking not to bring infringement proceedings, extended that offer to cover Baxter's customers, and would have agreed to extract an undertaking from any assignee to give the same protection.

Baxter maintained that this was unrealistic: after all, it was only the filing of Fresenius's unconditional amendments to the patent and acknowledgement of non-infringement on 1 August 1 that dealt with its concerns and resulted in its entire protection. Fresenius asserted that it had taken that long for it to realise that Baxter would be content with a patent with only one claim.

Judge Hacon ordered Fresenius to pay 50% of Baxter's costs up to 1 August. In his view:

* It was not easy to draw any sensible conclusion as to what would have happened, had Baxter issued a letter before action, since there was fault on both sides.

* It was virtually always appropriate for a claimant to write a letter before action -- even if there was no reasonable expectation that there would be any sensible response. In this case, Baxter's failure to do so meant that it was not possible to say how matters would have been resolved; the court was thus required to speculate.

* It was likely that there would have been an exchange of correspondence resulting in Fresenius making it clear to Baxter that it did not wish to engage in litigation against it, and that Fresenius would have offered the commitment not to assert the patent against Baxter. It was, however, likely that Baxter would not have been satisfied with that, as it needed protection for its customers and from any assignee of the patent.

* When Baxter had raised its concerns initially in May 2014, Fresenius had not responded with speed and Baxter had only become satisfied with the position on 1 August. Had the letter before action been written, it was possible that matters would have been resolved, but equally possible that they would not  --  so that litigation would have started and costs would have been incurred in any event.

This blogger is prepared to accept that the judge has made the correct decision on the facts before him, but he feels some unease at the amount of speculation and surmise on which the determination of the allocation of the costs burden was based. Judges are expected to know the law and to be able to establish facts, either in absolute terms or on a balance of probabilities. However, they do not come equipped with retrospective crystal balls and reasoning of this nature would, it seems to him, be vulnerable to challenge if closely scrutinised by an appellate court.

Fancy bit of case management training: here's a course to pursue doggedly ...

The Chartered Institute of Patent Attorneys (CIPA) has informed PatLit that it is going to be repeating its residential course on making use of your rights in the Intellectual Property Enterprise Court (IPEC), England and Wales.  As CIPA explains:

Some patent attorney litigators
have a real "can"-do attitude

The course centres on a patent infringement & validity case study from pleadings, via the case management conference [this is the bit which this blogger gets very excited about, since case management is the best way of bringing cases on quickly and in a highly focused manner -- but only if handled properly] and culminating in a mock trial.  All participants will get hands on experience in the necessary skills to litigate in the IPEC with feedback from experts in the field (including PALs [patent attorney litigators, that is], solicitors and patent barristers).  Our tutors will also cover the practice and procedure necessary to handle such litigation. Judge Hacon has agreed to give a guest speech. The course consists of two parts: a preliminary day at CIPA on 2 September 2014 followed by a residential three days at Missenden Abbey [this sounds a bit like a religious retreat ...] from Thursday 18 to Saturday 20 September 2014.  The course is expensive intensive but so is litigation. It is aimed at those both with and without previous experience and provides an invaluable opportunity to acquire or sharpen one’s skills.

 Further details are available from the CIPA website here.

The cost of the course is £1,300 + VAT for CIPA members, inclusive of accommodation at Missenden Abbey, together with meals. If you're interested you'd better be quick: bookings close on Tuesday 19 August. To save a place just email CPD@cipa.org.uk

The IPEC: how does it feel?

How is the Intellectual Property Enterprise Court (IPEC) faring? This intriguingly-named court, replacing the much-admired Patents County Court, is currently manned by His Honour Judge Richard Hacon who is taking time off from his serious duties to give us a subjective account of what it feels like to have been six months at the helm.  Richard's talk, "Reflections from HHJ Hacon on the first six months", takes place at the London office of Hogan Lovells International LLP (50 Holborn Viaduct, London, EC1A 2FG).


This event, organised by the AIPPI UK, takes place on 22 May 2014 at the conveniently early time of 5.00 pm for the benefit of those who are attending other events later that day. Attendance is free for UK members and new applicants for membership, and £25 for non-members. There are 1.5 hours-worth of CPD points. To attend, just click here.

"Faint" arguments not for the faint-hearted

Manvers Engineering Limited and another v Lubetech Industries Limited and others [2013] EWHC 3393 (IPEC) is on the whole a fairly unexciting, unremarkable ruling that the claimant's patent was valid (good news for him) but not infringed (oh, bother ...) The Court was the Intellectual Property Enterprise Court, England and Wales, and the judge a surprisingly senior Mr Justice Mann, who has been a member of the Chancery Division of the High Court for nearly ten years, and a Patents Court judge for most of that time too.

The interesting thing about this case was a slice of common sense which Mann J served up on a plate:

"29. In his "faint" (his word) argument in favour of infringement for this product Mr Wilson relied on a picture in the defendants' brochure which suggested that part of the long side of the liner would ride partly up the wall of the collector, and he suggested that he had a case for secondary infringement by selling the product with some sort of guidance as to its use in an infringing way. This argument is hopeless. ... There is no question of this configuration infringing.

30. I would go further in relation to this argument. This court (IPEC, as it now is) exists to provide quicker and cheaper determination of IP disputes. Speed and economy of hearings are at the heart of the procedure. That objective is frustrated if "faint" points, in which there is obviously no real hope, let alone any real prospect, of success take up the time of the court. Parties to proceedings in this court really should bring to it only the main points that are capable of making a difference. Judgment must be exercised as to which points it is worth putting before the court".

This blogger hopes that parties will take these words to heart.  So many people complain about patent litigation being expensive and cumbersome, but without appreciating that this consequence is of their own doing.