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Patent damages not refunded if EPO cancels patent

'Bad business sense,' court rules

Damages for patent infringement awarded by a UK court must not be paid back even if the patent is later declared invalid by the European Patent Office (EPO), the Court of Appeal has ruled.

The court was addressing the question of which body has the final say in a patent case, a UK court or the EPO. It ruled that when the UK courts system is exhausted and an order is made that damages must be paid, that order cannot be overturned because of actions at the EPO.

Lord Justice Jacob said in his ruling that his decision was based on the need for certainty in business.

"First and foremost, the defendant has had a full and fair opportunity of attacking the validity of the patent in his own proceedings. Next there is a very very strong public interest in the finality of litigation. Finally a party who had lost would have a strong motive for finding further or better reasons for attacking a patent and getting some third party to do so, thereby undermining the first decision. It is much better that he knows that the first litigation about validity is the time and place for him to get his best case together – that he knows he will have no second chance," he said.

"Now a purist may say: it is a nonsense, and moreover an unjust nonsense, for a man to have to pay for doing what, with hindsight, we know to have been lawful. But I think there are good and pragmatic reasons why the purist approach makes bad business sense. You cannot unravel everything without creating uncertainty. And where a final decision has been made on a fair contest between the parties, that should stand as the final answer between them."

The case involved Unilin Beheer, which made flooring, and Berry Floor and B&Q, which were found to have made flooring which infringed a Unilin patent.

Unilin's patent was granted by the European Patent Office, which entitled it to receive a UK patent. It sued Berry and B&Q in the UK and won the case and the resulting appeal.

Meanwhile, Berry and B&Q started a separate procedure aimed at convincing the EPO to render the patent invalid. This process is called an "opposition" and is similar to revocation actions in national courts.

When Unilin sought its damages, Berry and B&Q applied for a halt to that process pending the outcome of its opposition to the patent at the EPO, which had originally granted that patent.

The Court of Appeal had to rule on whether or not the UK courts, which are still considering how much Unilin should be paid, must wait until the EPO process is complete to judge whether or not the damages should be paid at all.

Jacob ruled that the UK court decision cannot be revisited because a separate process at the EPO has come up with a different result to it. "I am not sorry to reach that conclusion," he said. "It means that businessmen in this country know that they can use the rather speedy court system here to get a conclusion one way or the other.

"If the patent is revoked, the way is cleared; if it is upheld and held infringed then compensation will be payable for past acts. And an injunction will run unless there is a later revocation by the EPO. Subject to that last point, the effect of all this is that one does not have to wait to find out who has won until the slowest horse in the race gets there."

Jacob also said that the case was not a simple question of which court was superior, but of how to best operate an imperfect European patents system.

"[It does not] help to ask whether a national court or the EPO is 'top'. It all depends on the circumstances, as the two following scenarios illustrate: the patent is still under opposition when a national court holds it valid and the EPO then revokes. So the EPO is 'top'. [Second,] the EPO holds the patent valid and a national court subsequently revokes it (there is no estoppel created by an EPO decision as to validity […]). So the national court is 'top'.

"In truth asking which tribunal is 'top' is simply not helpful – there is just the untidy compromise inherent in the EPC and one which cannot be properly resolved unless and until a rational patent litigation system for Europe is created."

After Jacob's judgment had been written the two sides in the case came to an agreement and settled their dispute, according to one of the other judges, Lord Justice Mummery.

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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