Halliburton Energy Services Inc v Smith International (North Sea) Ltd & Ors

LORD JUSTICE JACOB: This is an unusual application. It comes about in this way. The patentees, Halliburton, sued Smith International and others for infringement of two European patents. Pumfrey J ruled that the patents were invalid. Halliburton appealed, but before the appeal got very far there was a worldwide settlement which included the settlement of this dispute. As a result of that, Smith International no longer desire to resist the appeal. Halliburton, nonetheless, want their patents back. They say Pumfrey J was wrong. The question then arises as to what this court should do. Could it allow the appeal without going into the merits? Must it hear the appeal, just hearing from the appellant, or should some assistance be either required or at least enquired of from the Comptroller, who under the rules is a party to all patent actions? Normally, of course, he only turns up when some issue of principle arises affecting the office or the law in general. This is not that sort of case.

In recent years a number of cases have come to this court in similar situations, or where the appeal has actually been allowed by consent. The practice has grown up of restoring the patent to the register without argument and with a comment that the restoration did not mean the patent had been held valid or ruled upon in any way by this court. Before us the Comptroller said that that practice is wrong; that this court cannot, without deciding for itself, reverse an order for revocation. It must be satisfied that the judge below was wrong.

Halliburton agree with the Comptroller that that is the appropriate course. They say they do not want their patent restored by, in effect, an administrative order of this court. If that is what they get they will have damaged goods. They want a ruling that the judge was wrong.

The Comptroller has pointed out that under the rules and practice direction, CPR 52, Practice Direction 13.1, the Court of Appeal will not normally make an order by consent. The practice direction reads as follows:

“The Appeal Court will not normally make an order allowing an appeal unless satisfied that the decision of the lower court was wrong but the Appeal Court may set aside or vary the order below a court with consent and without determining the merits of the appeal if it is satisfied there are good and sufficient reasons for doing so. Where the Appeal Court is requested by all parties to allow an application or an appeal the court may consider the request on the papers.

“The request should state that none of the parties of the child or patient can set out the relevant issue of the proceedings and the matters relied on as justifying the proposed order can be accompanied by a copy of the proposed order.”

I think, given that practice direction, given the views of the Comptroller and the patentees in this case, that the court has no option but to hear the merits of the appeal. The previous practice, save perhaps in some exceptional circumstance which I cannot imagine at the moment, is not appropriate. The normal position must be that the Court of Appeal will not restore a patent which has been held invalid by the court below unless that decision is shown to be wrong.

I confess that I come to this conclusion with no great joy, since I fear it may be me that will be in the court which gets to hear these one-sided appeals, along with two other members of the court who will be looking to me to be doing most of the work; at least, that is what Mr Watson submitted.

The question, then, is as to the conduct of this appeal. In particular what assistance, if any, should the Comptroller provide or be directed to provide? As I have said, this is not normally the sort of case where the Comptroller would intervene of his own motion. There is no sufficient question of general interest involved. Moreover, any intervention in this case would be a very difficult and expensive matter. The technology, as can be seen from Pumfrey J’s judgment, is extremely difficult. The Comptroller would not have access to persons skilled in the drilling art; he would have to work from the transcript below, and in the nature of things he could not provide a full-blooded opposition to the appeal. On the other hand, he may be able to be of some assistance. He is not actually in a position today to say where he stands on that. I have come to the conclusion that it is not necessary for this court to direct, as it seems the court has power to do, the Comptroller to attend. On the other hand, once he has received the skeleton argument on appeal he may feel that he is able to assist. I would leave that entirely a matter for him.

One factor that I do not think should concern him is the question of costs. It is the patentees who have entered into this settlement agreement, having sued and lost their patents thus far; it is the patentees who want their patents from the Court of Appeal, on what would otherwise be a wholly one-sided appeal. If the Comptroller thinks there is a sufficient public interest and that he can provide sufficient assistance on the appeal, it is the patentees who have got us to that position and I think it is a case in which it would be appropriate to make a decision now that if the Comptroller decides to intervene his costs will be paid by the patentees. The costs will, of course, be subject to assessment, so if he takes unreasonable steps then they will simply be discounted in the assessment.

This decision in no way is an indication that this court is asking the Comptroller to come. In some ways, Mr Watson will be better off if the Comptroller is there, because if he were to win the appeal he would be able to say he won it in the teeth of some opposition. His patent would not have quite the same authority as if it had been restored in the face of the full-blooded opposition, but it would be somewhat better if it had been restored in the absence of any opposition.

Accordingly, I would direct that this appeal be heard as a matter of substance and not as a formality, and that with appropriate directions the Comptroller should be given time to consider whether or not he intends to appear on the basis I have indicated as to costs.

I should also mention this: that I caused inquiries to be made of the Office of Fair Trading. For there would potentially be competition law problems with a consensual allowance of the appeal. In the even the point does not arise. I would record the Office’s view, however, namely that competition law would not prevent the court from allowing the appeal and restoring the patent by consent. If there is an underlying infringement of competition law in the settlement agreement itself, then there is. But that would not concern the court. We are grateful to the Office for its help.

There is one other question. That is whether or not this court should have the assistance of a scientific advisor. Mr Watson said, undoubtedly. In those circumstances, it obviously makes sense to direct there should be such an adviser in principle. Mr Watson suggested that one need not go to the level of a Fellow of the Royal Society or the like, but maybe assistance could be provided by a patent office examiner if the Comptroller is not going to appear. The patent office does not know whether they could provide any such person. What is clear is that if any person is provided, whether from the patent office or elsewhere, is that the costs of that provision would also fall upon the patentees. Mr Watson so agreed.

LORD JUSTICE RIX: I agree. I would merely add that my understanding of my Lord’s judgment in respect of costs is that if the Comptroller does participate in the appeal then the appellants would be responsible, even if they were to succeed in their appeal, both for their own costs and for the costs of the Comptroller.