10 April 2013

Intellectual Property Litigation - the Funding Options

Until the 31 March 2013 it was possible to enter a conditional fee agreement ("CFA") whereby the other side would pay any success fee. Similarly, it was possible to look to the other side to pay an after-the-event ("ATE") insurance premium.   In his Final Report Sir Rupert Jackson recommended that success fees and ATE insurance premiums should cease to be recoverable from unsuccessful opponents in civil litigation as those costs were "the major contributor to disproportionate costs in civil litigation in England and Wales".. S.44 (4) and s.46 (1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which came into effect on 1 April 2013 carried those recommendations into effect.  It is, of course, still possible to enter a CFA and take out ATE insurance but any success fee or insurance premium has to be paid by the successful party out of any damages that the successful party may receive.

Sir Rupert also recommended that that
"lawyers should be able to enter into contingency fee agreements with clients for contentious business, provided that:
  • the unsuccessful party in the proceedings, if ordered to pay the successful party’s costs, is only required to pay an amount for costs reflecting what would be a conventional amount, with any difference to be borne by the successful party; and
  • the terms on which contingency fee agreements may be entered into are regulated, to safeguard the interests of clients."
That recommendation is implemented by s.45 of the 2012 Act and The Damages-Based Agreements Regulations 2013 (SI 2013 No 609).

As I said in my book, "Enforcing Intellectual Property Rights, A Concise Guide for Businesses, Innovative and Creative Individuals" there was never very much scope for CFAs in intellectual property litigation and I explained why in "No Win No Fee" NIPC website 14 July 2011. There was even less scope for CFAs in the Patents County Court with scale costs and capped totals.  In my entire career at the IP Bar I have never entered a CFA though I have come close on a couple of occasions.

Although there may be scope for damages based agreements for small IP claims now that the upper limit for damages for most claims has been raised from £5,000 to £10,000, the best funding option for most small businesses is before-the-event ("BTE") insurance as I noted in "IP Insurance Five Years On" Inventors Club 23 Oct 2010. Sir Rupert observed in  his Final Report that the market for BTE insurance would be very different if his recommendations were accepted.

A company that has responded to the opportunities provided by this new market is COBRA Special Risks Ltd. ("COBRA"). One of COBRA's trading identities is COBRA Legal and IP. COBRA describes itself on its website as:
"London Market specialists providing intellectual property insurance solutions to a wide range of clients; from new start-up ventures with one great idea, to multinational corporations with extensive intellectual property portfolios.

With our expert team of IP specialists, COBRA Legal & IP can arrange insurance that will:
DEFEND your position if you are accused of infringing a third party's intellectual property;
PURSUE others who you believe are infringing your own intellectual property; and
PROTECT against damages awards which may arise from your intellectual property litigation.
With cover being available for all intellectual property rights including Patents, Registered Designs, Trademarks, Copyright and Domain Names, and anywhere in the world, COBRA Legal & IP will find the right solution for you."

What distinguishes COBRA from other BTE insurers is that its directors include a chartered patent attorney. Before joining COBRA, Ian Wishart had worked for the National Coal Board and Johnson Matthew as well as in private practice in Oxfordshire,

It appears from its proposal forms that COBRA can offer the same BTE and ATE cover as other IP insurers but it has one product that I have not seen before.   Its IP Opinion policy is said to be "specifically designed for new start-up companies, and smaller SME companies."  According to COBRA's website it would as follows:
"If the policyholder is faced with a potential infringement action, for example accused of copying a competitor's trade mark, design, or patent, then the insurer will pay for a full IP legal opinion. Consequently, the policyholder will be in a position to know whether they need to quickly negotiate a compromise, or whether they might have a defence and that their competitor is attempting to damage their business without any actual merit to their case.
If the policyholder considers that a competitor has infringed their insured IP rights, then the policy will again pay for a full IP legal opinion. The policyholder can then make an informed decision as to whether they can pursue the potential infringer, or whether this would be the wrong decision."
No doubt if the insured gets a favourable opinion he or she can seek ATE insurance or even, if the claim is big enough, from a third party investor such as Harbour Litigation Funding Ltd. which I mentioned in Litigation Funding for IP Claims, NIPC website, 18 Sept 2012. I understand that COBRA, which has connections with Harbour and other litigation funders can help to arrange such investment in a suitable case.

It is important to note that not all IP disputes have to be litigated. Generic top level domain name disputes, for instance, are more apt for settlement under ICANN's Uniform Domain Name Dispute Resolution Policy and many .uk country code domain name disputes by Nominet's Dispute Resolution Policy. Since Jospeph Dalby and I are both on the WIPO domain name dispute resolution panel we have considerable expertise in handling domain name disputes in 4-5 Gray's Inn Square. I will be chairing a seminar on Arbitration and  domain name dispute resolution at the Old Distillery Building in Dublin at 18:00 on 15 April 2013 at which Joseph and Kate Colleary of Eversheds will be the speakers.  

Should anyone want to learn more of this topic, he or she can call me on +44 (0)20 7404 5252 or contact me through Facebook, Linkedin, twitter or Xing, or through my contact page.

07 April 2013

The IPO's New Improved Mediation Service - will it make a difference?

In "The End of Mediation?" which I posted on 4 June 2012 I wrote that the IPO was thinking of discontinuing its mediation service because it had conducted only 13 mediations in the previous 5 years and only one in the last year.  That was not because the IPO service was expensive or because it was rubbish. I had used it in 2009 and was very satisfied (see"Practice: Mediation in the IPO" 2 Oct 2009). Nor did it appear that mediation work was going elsewhere.

In my article I ventured some suggestions as to why mediation of intellectual property disputes seemed to be going out of style. At least in England and Wales.
"I think there are a number of explanations for the low take up of the IPO's mediation service. First, commercial and litigation solicitors tell me that they are getting far less intellectual property work nowadays. Getting rid of employees and getting out of commitments such as shareholders; agreements and partnerships seem to be the matters upon which my contacts in northern commercial law firms are consulted most frequently. Secondly, with the new Patents County Court rules the risks and costs of litigation have come down (see my article on the "New Patents County Court Rules" 31 Oct 2010). Thirdly, there are other forms of ADR such as examiners' opinions on patent validity and infringement and domain name dispute resolution services which appeal more to patent and trade mark attorneys and specialist solicitors. Fourthly, there are urban myths in this area of practice such as intellectual property insurance is useless, references to the Comptroller under s.61 (3) of the Patents Act 1977 or, indeed, that there are no specialist intellectual property counsel outside London which lead to bad advice. Fifthly, mediation is getting a bad name because it an extra expense resorted to by the party with the longer pocket to force concessions from the weaker party."
Nevertheless, the IPO carried out a consultation and decided that it was worth carrying on the mediation service.

The Office has re-launched the new service with a number of leaflets which are well worth reading:
One important change since last June is that fees are now charged on a scale that takes account of the sum in dispute and the number of hours spent on mediation.   For a 1 hour mediation in Newport where the amount in dispute is less than £10,000 the fee is £55 per party which is not bad value for a specialist service. Another change is that mediation can now be conducted by telephone and at centres other than London or Newport.

Hearing officers seem to be a bit more ready to recommend mediation.  I am currently instructed in an entitlement application in the IPO where mediation has been suggested.   That did not happen in previous entitlement cases in which I was consulted.   I am not sure whether the new small claims track of the Patents County Court will encourage take up.  The Guide to the Patents County Court Small Claims Track mentions mediation as one of the available types of ADR but does not recommend it over the others.  As I pointed out in "Patents County Court - the New Small Claims Track Rules" 20 Sep 2012 the costs and risks of the new small claims track are so low a party may as well press on for judgment.

Should anyone want to learn more of this topic, he or she should call me on +44 (0)20 7404 5252 or contact me through FacebookLinkedin, twitter or Xing, or through my contact page.

05 April 2013

Make or Mend: Schütz v Werit reaches the Supreme Court

Schütz (UK) Ltd v Werit (UK) Ltd  [2013] UKSC 16 Supreme Court Lords Neuberger, Walker, Mance and Kerr and Lady Hale)

This was an appeal against the decision of the Court of Appeal in Schütz (UK) Ltd v Werit (UK) Ltd [2011] EWCA Civ 303, [2011] Bus LR 1510, [2011] FSR 19 which I had blogged in "Patents: Schütz (UK) Ltd v Werit (UK) Ltd" on 2 April 2011.

The point in this appeal was whether cross-bottling - the practice of replacing the a 1,000 litre bottle  that had been supplied by Schütz (U.K.) Limited, the exclusive licensee of a patent for a type of intermediate bulk carrier ("IBC") like the one pictured above, with one supplied by a third party such as Werit - amounted to making for the purpose of s.60 (1) (a) of the Patents Act 1977.  In the Patents Court, Mr. Justice Floyd held that it did not (see  Schutz (UK) Ltd v Werit UK Ltd and Another [2010] EWHC 660 (Pat), [2010] Bus LR 1244, [2010] FSR 22). The Court of Appeal (Lord Justices Ward, Jacob and Patten) disagreed and reversed his decision.

The patent in suit was European Patent (UK) 0 734 967 for a pallet container. The relevant claim was for:
"[A] Pallet container for the transporting and storing of liquids, having a flat pallet, an exchangeable inner container made of plastic material with an upper, closable filler opening and a lower emptying device and also, surrounding the inner container, one outer sleeve which consists of vertical and horizontal lattice bars made of metal which support the plastic inner container filled with liquid,
[B] the lattice bars which are configured as tubes being indented at the intersection points to form trough-like, double-walled recesses extending in the longitudinal direction of the lattice bars
[C] in such a manner that at each intersection point between the longitudinal edges of the recesses of two lattice bars lying perpendicularly one above the other there arise four contact points with a material accumulation respectively corresponding to the quadruple lattice bar wall thickness, and the four contact points of the two lattice bars being welded together at the intersection points,
[D] characterised in that the trough-like recesses of the vertical and horizontal lattice bars have a central raised part extending across the cross-section of the recesses,
[E] two lattice bars respectively lying one above the other at the intersection points are welded together at the four contact points of these raised parts and the incisions of the recesses of the lattice bars adjacent on both sides to the raised part
[F] with the contact and weld points form restrictedly elastic bending points with a reduced bending resistance moment relative to the raised part for relieving the weld joints at the intersection points upon application of static and/or dynamic pressure on the lattice sleeve."
Delivering judgment on behalf of the whole Court, Lord Neuberger construed the claim as follows:
"i. Item [A] extends to a complete IBC, i.e. a pallet, a bottle (the "inner container") and a cage (the "outer sleeve");
ii. The claimed inventiveness lies in items [D], [E], and [F], as is indicated by the introductory words "characterised in that";
iii. The inventiveness of the Patent lies in the idea of flexible weld joints in the cage, to increase its strength and durability;
iv. More specifically, the inventiveness lies in the idea of introducing a dimple on either side of the weld and a central raised portion;
v. The description of the Patent acknowledges that the bottle is "exchangeable" – i.e. replaceable."
As both Lord Neuberger and Lord Justice Jacob pointed out in their respective judgments, the photo shown above was not a picture of the patented invention but of a previous version if an IBC made by Sotralentz and Mauser which formed part of the prior art. They had inserted the picture into their judgments to make it easier to understand the issue.

The extent to which the owner of a patented product can repair it by replacing a worn component with a reconditioned part supplied by a third party had been considered by the House of Lords in United Wire Limited v. Screen Repair Services (Scotland) Limited and Another and Others [2000] 4 All ER 353, [2000] UKHL 42. In that case their lordships held that the repair of a patented product is by definition an act which does not amount to making it adding, in Lord Hoffmann's words, that "repair is one of the concepts (like modifying or adapting) which shares a boundary with "making" but does not trespass upon its territory."

The trial judge held that replacing the inner container of a Schütz IBC with a Werit bottle did not amount to making the patented product and suggested the following test:
"the correct approach is to ask whether, when the part in question is removed, what is left embodies the whole of the inventive concept of the claim", and "the inventive concept of [this claim] is wholly embodied in the Schütz cage" 
The Court of Appeal rejected that test.

Before considering United Wire and other authorities Lord Neuberger made the following preliminary observations:
"25. It seems clear that the effect of section 60(1)(a) is that a person infringes a patent for a product if that person 'makes' the product, as claimed in the patent concerned. As to the "making", that is the verb used in section 60(1)(a). As to the product being defined by the claim, that seems clear from section 125(1). In any event, if it is not the product as claimed in the patent, it is hard to see what else the subject matter of the "making" could rationally be.
26,  The word 'makes' must, of course, be interpreted contextually. In this case, the word should, in my view, be approached bearing in mind a number of considerations (which sometimes may be "apparently irreconcilable" in this field, as Robert Walker LJ pointed out in Cartonneries De Thulin SA v CTP White Knight Ltd [2001] RPC 6, para 21 quoting Attorney-General v Prince Ernest Augustus Of Hanover [1957] AC 436, 461). First, the word 'makes' must be given a meaning which, as a matter of ordinary language, it can reasonably bear. Secondly, it is not a term of art: like many English words, it does not have a precise meaning. Thirdly, it will inevitably be a matter of fact and degree in many cases whether an activity involves 'making' an article, or whether it falls short of that.
27. Fourthly, the word 'makes' must be interpreted in a practical way, by reference to the facts of the particular case. Fifthly, however, there is a need for clarity and certainty for patentees and others, and for those advising them. Sixthly, it should be borne in mind that the word applies to patents for all sorts of products, from machinery to chemical compounds. Seventhly, one should bear in mind, at least as part of the background, the need to protect the patentee's monopoly while not stifling reasonable competition.
28.  Eighthly, the word 'makes' must be interpreted bearing in mind that the precise scope of a claim may be a matter almost of happenstance in the context of the question whether the alleged infringer 'makes' the claimed product. Lord Diplock described the specification of a patent as 'a unilateral statement by the patentee, in words of his own choosing' by which he states 'what he claims to be the essential features of the new product' – Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183, 242. As Lord Hoffmann explained in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2004] UKHL 46, [2005] 1 All ER 667, [2005] RPC 169, para 21, a claim is, or at least should be drafted 'not only … in the interest of others who need to know the area 'within which they will be trespassers' but also in the interests of the patentee, who needs to be able to make it clear that he lays no claim to prior art or insufficiently enabled products'. As Lord Hoffmann went on to explain in para 35, all sorts of factors, only some of which may appear to be rational, can influence the person drafting a claim.
29. Ninthly, where, as here, there is a decision (United Wire) of the House of Lords or this court on the meaning of the word, it cannot be departed from save for very good reasons indeed. Finally, particularly given that section 60 (like section 125) is one of the sections mentioned in section 130(7) of the 1977 Act, the word should be interpreted bearing in mind that it is included in a provision which is intended to be part of a scheme which applies in many other jurisdictions."
Lord Neuberger analysed the decisions of the House of Lords and the courts below in United Wire and also decisions of the German courts on what constitutes making a patented article. He concluded at paragraph [50] that:
"The mere fact that an activity involves replacing a constituent part of an article does not mean that the activity involves 'making' of a new article rather than constituting a repair of the original article. Repair of an item frequently involves replacement of one or some of its constituents. If there are broken tiles on a roof, the replacement of those tiles is properly described as repairing the roof, and such replacements could not be said to involve rebuilding, or "making", the roof. Indeed, replacing the whole of a deteriorated roof of a building could be regarded as repairing the building, taken as a whole, rather than reconstructing the building. There are many cases concerned with repairing obligations in leases which illustrate this point - see e.g. the discussion in Woodfall on Landlord and Tenant(October 2008), Vol 1, paras 13.32 to 13.037.12."

The Supreme Court rejected the approaches of both the trial judge and the Court of Appeal in this case.  Though Mr Justice Floyd's test was "attractive and simple to apply" it seemed "to conflict with the wording of sections 60 (1) (a) and 125 (1) as well as with the approach adopted by the Court of Appeal and House of Lords in United Wire"..On the other hand, their lordships thought that the Court of Appeal was too ready to accept that the outcome of this case was governed by United Wire and did not appear to have recognised that the question of whether replacing a part of a patented article constitutes 'making' it was a matter of fact and degree. As they had disagreed with the approaches of both courts the Court offered its his own test at paragraph [61]:
"As is clear from United Wire, this question requires the court to focus on the question of whether, when it replaces a component of the article (viz. the bottle) the subject of the Claim, Delta 'makes' that article (viz. the IBC as described in the Claim). In answering that question, I consider that it is both legitimate and helpful to consider the question of whether the bottle is such a subsidiary part of the patented article that its replacement, when required, does not involve "making" a new article."
Weighing up the various relevant factors, Lord Neuberger on behalf of the Court came to the conclusion at paragraph [77] that by replacing the bottle in the IBC, a third party does not 'make' the article identified in the claim and that Mr. Justice Floyd was right, "albeit for somewhat more nuanced reasons."

The decision between making and mending is an important one and is relevant to other intellectual property rights such as designs and possibly even copyright in the context of computing. This case, which is the second appeal on patents to reach the Supreme Court, has been overshadowed by the decision of the Indian Supreme Court in Novartis but it of far more relevance to British practitioners than the Glivec case. Should anyone want to discuss this case with me he or she can call me on +44 (0)29 7404 5252 or send me a message through my contact form. He or she can also follow me on on Facebook, Linkedin, twitter and Xing.