Thorn Security Ltd v Siemens Schweiz AG

Printed circuit boards (PCBs) are ubiquitous in electronic equipment. Typically a PCB is a non-conductive substrate on which there are metal traces carrying electrical signals. They may be on one side of the substrate or on both. In many cases it is necessary to protect the PCB against damage and against interference with the circuitry by, for instance, condensation which might cause it to short-circuit or by corrosion. This is done by a coating. However, once the PCB has been protected, it may become necessary to alter or repair the circuitry. Typically this will require the removal of the protective coating or part of it.

European Patent (UK) No EP 0 577 094 BI claims a “Protective Covering for printed circuit boards and method for their manufacture”. The novel feature of the covering, inspired by packaging of consumables, was that it contained added wax and was fused to the board by the action of heat. It claimed that the addition of wax produced certain benefits, particularly in carrying out repairs. The patent is now owned by the Respondent, Siemens Schweiz AG (“Siemens”), following a series of mergers. It claims that a coated PCB manufactured by the Appellant, Thorn Security Ltd (“Thorn”), and installed in a smoke alarm, infringes the patent. Thorn’s PCB is coated with a coating that contains 5 per cent wax. Following a trial of the action Mann J held that the patent was valid and infringed, and awarded damages or, at Siemens’ election, an account of profits.

There is no challenge to the judge’s decision on the validity of the patent. However, with the permission of Jacob and Wilson LJJ, Thorn appeal on the question whether it has been infringed (“the Infringement Issue”). Thorn also appeal, with the permission of the judge, on the question whether Siemens are entitled to recover damages in respect of a period of infringement which pre-dated their registration as proprietor of the patent (“the Assignment Issue”). We deal first with the Infringement Issue.

We can take the description of the patent in suit largely from the judge’s judgment. The patent describes the invention as follows:

"The invention concerns a printed circuit board, having a protective coating made from an electrically insulating, thermoplastic material, and a process for manufacturing such a printed circuit board with protective coating."

It goes on to describe the existence of existing coatings, designed to protect from moisture and other environmental effects, and says that protective coatings were usually manufactured from a suitable plastic compound and created by dipping, potting, varnishing, spraying or coating, all of which have disadvantages in presenting difficulties or impossibilities of covering uniformly and in coating sharp edges and points. Coatings made in this way are either liquid or particles. The patent next describes an item of prior art (Toshiba) where a strip of thermoplastic material is applied to the front and rear sides of a PCB and bonded by fusing to form an integrated circuit card. This process has the disadvantage that the circuits are no longer accessible after sealing. The patent goes on to refer to certain plastic films made from "thermoplastic material to which a certain amount of wax is added and which has been used to package certain goods, such as consumables". It continues:

“Based on this prior art, the object of the invention is to create a printed circuit board with a protective coating of the type referred to above, in which the protective coating does not have the disadvantages of the prior art. In particular, the protective coating can be applied to all parts of the printed circuit board in the shortest time by means of a simple process with low maintenance devices, with uniform layer thickness and virtually complete imperviousness to air and fluids, and allows a specific component to be left free-standing with precision. A further object of the invention is to form the protective coating in such a way that during the entire life of the printed circuit boards, the individual circuit elements can be measured through the protective coating and individual components can be replaced, even after the protective coating has been completed.”

To achieve these objects, the printed circuit board with a protective coating according to the invention is characterised in that the protective coating consists of a plastic film made of electrically insulating, thermoplastic material to which a wax is added to improve its flow properties, said wax at the same time facilitating through-plating and soldering operations through the protective coating, and that the geometrical shape of the plastic film corresponds to the area of the printed circuit board to be protected, and the film is fusedonto the printed circuit board by the action of heat, so that it covers the printed circuit board in a virtually air-tight and moisture proof manner. Although the claim itself does not specify any particular proportion of thermoplastic to wax, the specification says that according to a preferred embodiment the thermoplastic material will consist of between 70 and 90 per cent of the compound product and the wax will consist of between 30 and 10 per cent. The preferable percentage of wax is 30.

“According to a particularly preferred process, the plastic film is formed from [a] strip by water-jet cutting, is brought to a plastic state by heating after positioning on the printed circuit board and is pressed onto the electronic modules by means of a silicone plug, so as to produce a tightly-fitting topography and to displace existing residual air, and in a final process step the protective coating is fused onto the printed circuit board under the action of further heating”

A product known as "Jet-Melt 3748", manufactured by 3M, is referred to as being a starting material. This was identified as being known as a hot-melt adhesive, that is to say an adhesive which is heated and melted before being used to form the bond required. Jet-Melt 3748 itself contains wax. A second component consisting of wax is then added to the Jet-Melt 3748. Lunarit 3286 is given as an example. A manufacturing process is briefly described:

“The best material proved to be one having a softening point above 100°C or a melting range of 120°C to 170°C, which when solidified on the printed circuit board forms a pore-free coating which is impervious to air and fluids … The film thickness is chosen so that the irregularities on the printed conductor, and especially solder spikes, are reliably coated without tearing the film during fusing. A film thickness of approximately 0.2 to 1.0 mm is usually adequate. Thicker films of several millimetres' thickness can also be used for special applications, for example protecting printed circuit boards which have projecting components or sharp points”

At a late stage in the described process:

“The film 16 is then heated to a temperature above the softening point in process step D, but without melting it. In process step E the softened film is pressed over the electronic components by means of a soft silicone plug, the film coming into close contact with the components, so that residual air is displaced. In a final process step the protective coating is fused onto the printed circuit board by further heating. This can be achieved advantageously by means of an infrared heater arranged above the film, or by other means, for example with the aid of hot air or a hot inert gas.

The protective coating 16 formed on the printed circuit board 9 covers the modules 13 to be protected, especially irregularities and points on them, with a layer of uniform thickness which is impervious to air and fluids, and reliably protect them against environmental influences. At the same time, partially exposed locations, for example for switches, potentiometers, test points and the like can easily be obtained without additional cost.”

Claim 1 of the patent, divided into convenient integers, claims:

“Printed circuit board for electronic modules, having a protective coating made from an electrically insulating, thermoplastic material,

the protective coating consisting of a plastic film made from an electrically insulating, thermoplastic material

to which wax is added to improve its flow properties,

said wax at the same time facilitating through-plating and soldering operations through the protective coating,

and the geometrical shape of the plastic film corresponds to the area of the printed circuit board to be protected,

and the film is fused onto the printed circuit board by the action of heat,

so that it covers the printed circuit board in a virtually air-tight and moisture-proof manner.”

Although the claim begins as a product claim, it changes towards its end to a process. It is, therefore, a claim to a product produced by a particular process. The italicised parts of the claim are integers which Thorn say are not found in their coated PCB. Consequently they say that their product does not infringe. There was some debate at trial about what was meant by “through-plating”. Plating is a procedure conducted prior to soldering to ensure a wettable surface, that is to say one which provides a better surface to achieve the bond. It would be necessary to carry out this operation prior to replacing or repairing a module on the board, and can be done by applying solder or by chemical means. The judge held that “through-plating” meant carrying out plating operations through the coating. This was the construction for which Siemens contended. There is no appeal against that.

Thorn’s product, and in particular how the coating was applied to the PCB, was described in a Product and Process Description (a PPD). The judge identified the following relevant features from the PPD:

The judge heard evidence from a number of experts: Prof Ehrenstein and Dr Pecht for Siemens and Mr Godfrey for Thorn. He found Dr Pecht to be a conscientious, thorough and experienced man; and in general he preferred Dr Pecht’s evidence to that of Mr Godfrey, where they conflicted. There were two additional questions of construction that he had to decide. The first was what the claim meant by “facilitating through-plating and soldering operations through the protective coating”. He held that the concept of “facilitating” was that there were practical benefits in making something easier in a way that could be appreciated by a practical user. A scientifically measurable difference without practical consequences would not qualify. Thus, so far as the question of infringement was concerned, he held that Siemens were entitled to rely on any means by which the wax in Thorn’s product made through-plating and soldering through the coating easier in a practical sense. Siemens challenge this construction by Respondents’ Notice.

The second question of construction was what the claim meant by “the film is fused onto the printed circuit board by the action of heat”. The judge construed this part of the claim as meaning that the fusion was caused by the action of heat alone. Siemens also challenge this construction by Respondents’ Notice.

It is convenient to deal first with the questions of construction. There was no dispute about the general approach to claims construction. Section 125 (1) of the Patents Act 1977 (“the 1977 Act”) provides:

“an invention for a patent for which an application has been made or for which a patent has been granted shall, unless the context otherwise requires, be taken to be that specified in a claim of the specification of the application or patent, as the case may be, as interpreted by the description and any drawings contained in that specification…”

Section 125 (2) provides that the Protocol on the Interpretation of Article 69 of the EPC applies to the construction of section 125 (1). That Protocol eschews a strict literal meaning of the words used in the claim; and equally eschews treating the claims as mere guidelines. Rather it adopts a position between these two extremes which combines a fair protection of the patentee with a reasonable degree of certainty for third parties.

However, the question is always what the person skilled in the art would understand the patentee to be using the language of the claim to mean. In approaching that question the skilled reader of the patent will consider the language of the claims in the light of the specification and drawings. Sometimes there is a limitation in the claim to the extent of the monopoly claimed. As Lord Hoffmann pointed out in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2005] RPC 9 such a limitation may appear inexplicable. He continued:

“One possible explanation is that it does not represent what the patentee really meant to say. But another is that he did mean it, for reasons of his own; such as wanting to avoid arguments with the examiners over enablement or prior art and have his patent granted as soon as possible. This feature of the practical life of a patent agent reduces the scope for a conclusion that the patentee could not have meant what the words appear to be saying.”

Mr Miller QC, for Siemens, says that the judge was wrong to hold that the notion of “facilitating” carries with it any element of practical benefit or that the practical benefits must be capable of appreciation by a practical user. He relies on a dictionary definition of “facilitate” as meaning “to assist the progress of” or “to promote” or “to help”; and reasons from that that there is no connotation of practical benefit to a user. Since at least the decision of the House of Lords in Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183 the courts have consistently stressed that a patent specification is a practical document addressed to a readership with a practical interest in what it describes. Even if we were to adopt the dictionary definition on which Mr Miller relies, the question would still remain: is progress assisted or helped if there is no practical difference? We find it difficult to accept that a patentee would include in his claim an integer which claimed that something was “facilitated” if it had no practical effect at all. In addition the facilitation to which the claim refers is the facilitation of identified practical operations: through-plating and soldering operations. It is not merely a reference to a change in the physical properties of the coating material, which had already been done by the preceding integer (“to which wax is added to improve its flow properties”). Nor are we able to accept that the patentee was doing no more than identifying an inevitable consequence of adding wax to the coating material. Whether this was the consequence of adding wax might depend on the quantity of wax that had been added.

The soundness of the judge’s conclusion is reinforced by a consideration of the purpose of the integer. The specification acknowledges that prior art had already proposed the use of thermoplastic material to encase a PCB. It also acknowledges that prior art had already proposed plastic films made from thermoplastic material to which wax had been added. Thus if the claim had merely claimed a protective coating made from thermoplastic material to which wax had been added, it might have been vulnerable to an attack on its validity. The claim does not specify the quantity of wax contained in the coating. But as we have said the example of thermoplastic material (before the addition of wax) given in the specification itself contains wax. The patentee cannot therefore have intended to claim a thermoplastic material containing very small quantities of wax. The inventive concept claimed in the patent was that the addition of wax in sufficient quantities facilitated the practical operations of through-plating and soldering through the protective coating. Thus it was in order to distinguish the invention claimed by the patent from the prior art that the patentee added the integers claiming that the wax facilitated through-plating and soldering operations through the protective coating. In our judgment, this integer operates as a performance requirement of the claim. In other words the protective coating must contain sufficient wax in order to achieve the facilitating effect. As Mr Purvis QC, for Thorn, put it: the patentee must have been talking about something that matters. We consider that the judge was right on this point.

On the second question of construction Mr Miller says that the judge wrongly introduced a limitation into the claim that was not there on a fair construction of it. Although the claim required the film to be fused onto the board “by heat”, it did not require it to be fused by heat alone.

Mr Miller says that in the patent in suit all that the claim does is to exclude methods of fusing that do not involve heat. He says that the patent will be infringed if the fusion process in the allegedly infringing product is promoted by heating, even if the actual fusion is achieved by the application of pressure or the creation of a vacuum (the inverse of pressure). As long as heat is one of the causative factors of fusing, there will be fusion “by” heat. The judge was wrong to hold that the fusion of the coating to the board must be by heat alone.

In order to interpret the claim we must look at the specification and drawings to see what the patentee means by the claim. In so doing we must have in mind that claim 1 is a claim to a product defined (at least in part) by the process by which it is made. So in order to understand claim 1 it is necessary to look at the way that the specification describes the process. Having made the film and cut it to the desired shape, the film is heated to a temperature above the softening point but without melting it (process step D). It is then pressed over the electronic components (process step E). At this stage, therefore, the film has been heated and had pressure applied to it. The specification continues by saying that in a “final process step” the coating is fused to the board by further heating (process step F). Thus it is not until process step F, which consists only of further heating, that the coating is fused to the board. Having regard to the way in which the process is described in the specification we consider that the skilled reader would conclude that the fusion takes place by the action of heat alone. In our judgment, therefore, the judge was also right in his construction of this integer of the claim.

In Biogen Inc v Medeva plc [1997] RPC 1 Lord Hoffmann said:

“The need for appellate caution in reversing the judge's evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance (as Renan said, la vérité est dans une nuance), of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation. It would in my view be wrong to treat Benmaxas authorising or requiring an appellate court to undertake a de novo evaluation of the facts in all cases in which no question of the credibility of witnesses is involved. Where the application of a legal standard such as negligence or obviousness involves no question of principle but is simply a matter of degree, an appellate court should be very cautious in differing from the judge's evaluation.”

Clarke LJ summarised the position in Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2003] 1 WLR 577:

“'[14] The approach of the court to any particular case will depend upon the nature of the issues and the kind of case determined by the judge. This has been recognised recently in, for example, Todd v Adam [2002] 2 All ER (Comm) 97 and REEF Trade Mark v Bessant (t/a REEF) [2003] RPC 101. In some cases the trial judge will have reached conclusions of primary fact based almost entirely upon the view which he formed of the oral evidence of the witnesses. In most cases, however, the position is more complex. In many such cases the judge will have reached his conclusions of primary fact as a result partly of the view he formed of the oral evidence and partly from an analysis of the documents. In other such cases, the judge will have made findings of primary fact based entirely or almost entirely on the documents. Some findings of primary fact will be the result of direct evidence, whereas others will depend upon inference from direct evidence of such facts.

[15] In appeals against conclusions of primary fact the approach of an appellate court will depend upon the weight to be attached to the findings of the judge and that weight will depend upon the extent to which, as the trial judge, the judge has an advantage over the appellate court; the greater that advantage the more reluctant the appellate court should be to interfere. As I see it, that was the approach of the Court of Appeal on a “rehearing” under the RSC and should be its approach on a “review” under the CPR.

[16] Some conclusions of fact are, however, not conclusions of primary fact of the kind to which I have just referred. They involve an assessment of a number of different factors which have to be weighed against each other. This is sometimes called an evaluation of the facts and is often a matter of degree upon which different judges can legitimately differ. Such cases may be closely analogous to the exercise of a discretion and, in my opinion, appellate courts should approach them in a similar way.

[17] In Todd v Adam, where the question was whether a contract of service existed, Mance LJ ([2002] 2 All ER (Comm) 97 at [129]) drew a distinction between challenges to conclusions of primary fact or inferences from those facts and an evaluation of those facts, as follows:

“With regard to an appeal to this court (which would never have involved a complete rehearing in that sense), the language of 'review' may be said to fit most easily into the context of an appeal against the exercise of a discretion, or an appeal where the court of appeal is essentially concerned with the correctness of an exercise of evaluation or judgment—such as a decision by a lower court whether, weighing all relevant factors, a contract of service existed. However, the references in CPR 52.11(3) and (4) to the power of an appellant court to allow an appeal where the decision below was 'wrong' and to 'draw any inference of fact which it considers justified on the evidence' indicate that there are other contexts in which the court of appeal must, as previously, make up its own mind as to the correctness or otherwise of a decision, even on matters of fact, by a lower court. Where the correctness of a finding of primary fact or of inference is in issue, it cannot be a matter of simple discretion how an appellant court approaches the matter. Once the appellant has shown a real prospect (justifying permission to appeal) that a finding or inference is wrong, the role of an appellate court is to determine whether or not this is so, giving full weight of course to the advantages enjoyed by any judge of first instance who has heard oral evidence. In the present case, therefore, I consider that (a) it is for us if necessary to make up our own mind about the correctness or otherwise of any findings of primary fact or inferences from primary fact that the judge made or drew and the claimants challenge, while (b) reminding ourselves that, so far as the appeal raises issues of judgment on unchallenged primary findings and inferences, this court ought not to interfere unless it is satisfied that the judge's conclusion lay outside the bounds within which reasonable disagreement is possible. In relation to (a) we must, as stated, bear in mind the important and well-recognised reluctance of this court to interfere with a trial judge on any finding of primary fact based on the credibility or reliability of oral evidence. In the present case, however, while there was oral evidence, its content was largely uncontentious.”

This passage was approved by the House of Lords in Datec Electronics Holdings Ltd v United Parcels Service Ltd [2007] 1 W.L.R. 1325. These principles have been applied in subsequent decisions of this court: see Meretz Investments NV v ACP Ltd [2008] 2 W.L.R. 904; Henwood v Barlow Clowes International Ltd [2008] EWCA Civ 577. Mr Miller also relied on a number of cases relating to the circumstances in which an appellate court will interfere with a judge’s exercise of discretion. Those cases are not in point. As Lord Mance said in Datec (in a speech with which the majority agreed):

“The judgment of Ward LJ in the Assicurazioni Generali case may be read as advocating a different test, which would equate the approach of an appellate court to findings of fact with its approach to decisions taken in the exercise of a discretion. As Waller LJ correctly pointed out in Manning v Stylianou [2006] EWCA Civ 1655, that is not the correct test, and it is the judgment of Clarke LJ in the paragraphs quoted above from his judgment that gives proper guidance as to the role of the Court of Appeal when faced with appeals on fact.”

Lord Mance also commented that the approach of an appellate court to the exercise of discretion or an evaluation of judgment analogous to the exercise of a discretion is a “steeper appellate hurdle”. The present appeal is not a case of discretion. Nor is it a case where the judge was applying a legal standard such as reasonable care or obviousness. This is a case in which the judge had to reach factual technical conclusions based on the evidence that he heard. The challenged conclusions to which the judge came concern narrow questions of technical fact; and we have been taken by counsel to all the evidence that bears on those conclusions.

The question on this appeal is whether, giving full weight to the advantages enjoyed by the judge who has heard the oral evidence, his finding of fact has been shown to be wrong.

We begin with the first of the two disputed integers.

The judge held that the presence of the wax improved the flow properties of the plastic film used by Thorn at the temperatures at which Thorn carried out its process, and at higher temperatures at which the initial experiments took place. He also found that wax in the film would improve the flow properties of the film generally (para 51). He found, further, that film containing wax would have a lower softening point, reduced viscosity, increased wetting capability and lower surface tension (para 67). It is important to note at this point that a reduction in viscosity means that the film containing wax is runnier than a film without wax; and that an increased wetting capability means that the film with wax is more adhesive (or stickier) than a film without wax.

The judge then had to decide whether the wax facilitated through-plating and soldering operations through the protective coating. Siemens’ case was that repairs on the board are made easier because the wax makes the plastic softer, makes it melt (in the sense of softening at a lower temperature than would otherwise be the case), improves its flow properties and improves its wetting abilities, with the effect that if one carries out a repair activity on a coated board or component, the coating is more easily penetrated, and flows back more readily to the disturbed area. This is particularly so where the repair activity involves a soldering iron. Thus part of Siemens’ case was that the coating containing wax had improved wetting capabilities (i.e. was stickier than its waxless counterpart). In paragraph 56 of his judgment the judge said that Siemens were entitled to rely on the following features (if demonstrated) as facilitating through-plating:

He then turned to consider whether these practical benefits had been demonstrated on the evidence. One of the main planks of Siemens’ case was an experiment called “Experiment 3”. This was designed to show that even after penetration by a soldering iron the coating in Thorn’s product (containing 5 per cent wax) continued to protect the underlying PCB, either because less of it had been removed during the repair, or because it had flowed back after the penetration. The judge was unimpressed with Experiment 3. He held that few useful conclusions could be drawn from it; and that the experiment did not establish either that Thorn’s product parted more easily than a waxless product; or that, having been penetrated, the coating flowed back and thus healed the penetration (paragraph 65). However, Experiment 3 was not the only plank in Siemens’ case. Siemens also relied on its other experiments and on the inherent improvement in the flow properties of the coating which is brought about by the presence of wax (paragraph 52; paragraph 66).

Before coming to his conclusions the judge commented on the state of the evidence generally. He said in paragraph 70 of his judgment:

“The evidence is in an unsatisfactory state. There is evidence about the general qualities of the Thorn waxed product when compared with the wax-less product, and there is general evidence about the sort of qualities that the two products have in terms of viscosity, wetting ability and so on. However, proof of infringement depends in this case, and in relation to the point currently in issue, on its being established that the Thorn product actually has a certain (facilitating) quality. The only experiment which sought to address that point directly was Experiment 3, and for the reasons given above it did not achieve the result contended for by Siemens. I was not given any explanation as to why experiments going more directly to the effects of penetration, through-plating and soldering were not carried out, or why presumably simple visual observations of the experimented-on board were not carried out. Siemens is therefore thrown back on such conclusions about the Thorn product as can be safely and properly drawn from evidence as to the general nature of the product and as to the views of the experts as to how they would expect it to perform when certain operations were carried out. Since those matters could in my opinion have been more directly addressed by experimentation or observation, and since Siemens has the factual burden of proof on this issue, I approach the exercise with caution so far as Siemens' submissions are concerned.”

This was not a promising start to a finding of infringement. The judge’s conclusions on the first of the disputed integers are contained in paragraph 71 of his judgment:

“Based on all that evidence I make the following findings and determinations on facilitation of through-contacting and soldering through the coating, and bearing in mind my conclusions as to the importance of a beneficial practical effect before anything can be said to have been "facilitated":

(i)

There is no direct evidence demonstrating the extent to which Thorn's coating is more easily penetrated by a soldering iron than a wax-less coating would be. By direct evidence I mean evidence of an actual exercise carried out on its coating in an attempt to measure that phenomenon. Experiment 3 did not measure that because there was no comparison with a wax-less coating.

(ii)

I accept Mr Godfrey's evidence that in terms of penetrability there is no material practical difference between the waxed product and the wax-less product in relation to a soldering iron at a normal temperature – something over 300°C according to Mr Godfrey.

(iii)

However, the nature of the waxed product, when compared with the wax-free product, is such that there are three significant and desirable practical consequences of using the former in the context of carrying out through-plating operations and soldering operations. First, the presence of wax means that melting occurs more easily and therefore charring or similar damage to the film is less likely to arise from heating at the high temperature of a "normal" soldering iron – see Prof Ehrenstein. Second, there would be a noticeable difference if one were using a lower temperature soldering iron – see Mr Godfrey. Third, if one were using a technique for removing the coating (which is a prelude to the actual activity of through-plating) such as Thorn's hot air gun, the waxed product would probably move aside more readily with less heat being applied. This last point was not directly addressed in the evidence, but I consider it to be a sensible inference from it. While comparative tests have not been carried out in relation to these three specific features, I consider that they have been proved in relation to the Thorn product by combining the expert evidence as to the effect of the introduction of wax into a thermoplastic product with the results of Experiments 1, 2, 4 and 5, which compared the flow, viscosity and melting qualities of the Thorn product with a waxless product and which demonstrated that it had the effects in those areas which would give rise to the three areas of facilitation that I have identified.

(iv)

I do not consider that it has been established that there is any relevant "healing" characteristic that has been demonstrated in relation to the Thorn product. The evidence on healing was theoretical, and Mr Godfrey did not consider that it had been demonstrated that it occurred in the context of a repair or through-plating exercise. I agree. While it was common ground that the wax would heal itself when something very thin like an electrical probe was pushed through, it was not demonstrated that the more invasive exercises involved in through-plating or soldering would be accompanied by such an exercise. Prof Ehrenstein's evidence was of theory. I do not accept it has been demonstrated in the real world.”

The reference to “through-contacting” as opposed to “through-plating” at the beginning of this paragraph seems to have been no more than a slip of the keyboard; and neither side made anything of it. In paragraph 72 the judge said:

“In the light of those factual conclusions it is therefore necessary to consider whether it has been established that the inclusion of wax in Thorn's product "facilitates" through-plating or soldering through the coating in the sense on which those concepts are used in the patent in suit. Siemens' case on this has two limbs – the facilitation of invading the coating, and the healing qualities afterwards. The second of those limbs has not been established. It has not been established that Thorn's coating heals in a material sense. The first, however, has. I consider that the body of evidence as to the general properties of the Thorn product is just sufficient to demonstrate that in use it has the quality of allowing easier access to the board and components through the coating because it can be had at lower temperatures, and with less risk of heat damage to the coating. This is a real practical benefit, and the quality facilitates the two exercises of through-plating and soldering through the coating – it makes it easier to achieve.”

The foundation of the judge’s ultimate conclusion on the presence of this integer in Thorn’s product is his finding in paragraph 72 (iii) of the judgment. Thorn complain that the judge’s finding was not supported by the evidence and was, in some respects directly contrary to it. It is important to note that as well as the specific references to particular experts, the judge also relied on the expert evidence about the general effects of introducing wax into a coating, and the results of experiments 1, 2, 4 and 5.

The judge expressed this finding as follows:

“… the presence of wax means that melting occurs more easily and therefore charring or similar damage to the film is less likely to arise from heating at the high temperature of a "normal" soldering iron…”

Embedded in the sentence are two sub-findings:

It is important to note that the judge’s finding related to charring or similar damage to the coating; not charring or damage to the board.

The judge dealt with the general characteristics of a coating to which wax had been added in paragraphs 66 and 67 of his judgment in the following terms:

“66…It was said that the wax lowers the melting or softening point of the material, reduces its viscosity, increase its wetting capability and lowers its surface tension, and that those qualities would mean that operating at a theoretical level, and without necessarily requiring actual demonstration experimentally, it would facilitate through-plating and soldering by melting more easily and flowing back to preserve its protective qualities as a covering for the board and its components.

67.

At the end of the day the evidence of the experts demonstrated that a thermoplastic film with wax would have the inherent qualities that I have referred to when compared with a thermoplastic film without those qualities – it would have a lower softening point, reduced viscosity, increased wetting capability and lower surface tension. Mr Godfrey essentially accepted all those points.”

This discussion was a discussion at a theoretical level. Siemens’ case was that the addition of wax changed the properties of the coating. The judge accepted that in paragraph 67 of his judgment as a theoretical proposition. Siemens’ case was that the mere fact that the properties of the coating had been altered by the introduction of wax led to the conclusion that it would facilitate through-plating and soldering. Consistently with his construction of the claim, the judge then had to decide whether this alteration in the properties of the coating led to the claimed benefits in a practical sense. The judge subsequently said that “flowing back” had not been established except in the case of penetration of the coating by a very thin probe. But penetration by a very thin probe (probably for the purpose of measurement) as opposed to through-plating or soldering was not part of the claim. So that finding can be put on one side.

The judge had already accepted Mr Godfrey’s evidence that a normal soldering iron operated at something over 300°C. He had also accepted Mr Godfrey’s evidence that in the case of penetration of the coating by a soldering iron at this temperature it made no practical difference to ease of penetration whether the coating contained wax or not. The evidence of Experiments 4, 5 and 6 had shown that Thorn’s coating (with wax) had a lower melting point than the equivalent coating without wax. In the former case the wax began to melt at 12^o C and the bulk began to melt at about 48^o C. According to Prof Ehrenstein at 86^o C the crystalline parts of the thermoplastic material were melting. In the latter case the material began to melt at about 80^o C. Again according to Prof Ehrenstein the maximum of the melting process took place at 97^o C. Thus the proven difference in melting point between the waxless coating and the coating with wax was 11^o C.

It was the temperature gradient between a normal soldering iron and the coating (with or without wax) that had led the judge to conclude that there was no practical difference in ease of penetration. We are unable to see how, in the light of that finding which seems to us to be entirely correct, the judge could have concluded that the a difference in the melting point of 11^o C meant that the coating with wax melted more easily in a practical sense when in contact with a soldering iron operating at a normal temperature. In our judgment the two findings cannot co-exist.

Mr Purvis submits, and we agree, that in order to conclude that the greater ease of melting reduced the likelihood of burning or charring, it would have to be established:

The principal basis for the judge’s finding on this point was the evidence of Prof Ehrenstein. Although the judge does not specifically say in that paragraph which part of Prof Ehrenstein’s evidence he was referring to, it is common ground that he must have been referring to paragraph 38 of Prof Ehrenstein’s first report. The judge quoted part of that paragraph in paragraph 63 (c) of his own judgment:

“The soldering rod locally heats the coating material very rapidly, whereas burning and other degradations of the materials are to be avoided.”

Making all allowances for the fact that English is not Prof Ehrenstein’s native tongue we find this sentence extremely obscure. It may mean (as Siemens submitted in opening the trial below) that the wax helps avoid burning and other degradation of the coating material. However, in commenting on this passage the judge himself said that Prof Ehrenstein was operating at a theoretical level, because no comparative tests had been carried out on a waxless coating. Moreover, as Mr Purvis pointed out, Prof Ehrenstein did not say that it was the 5 per cent wax in the Thorn coating which prevented “burning and other degradations”; and did not say that the heating of the coating would, in any practical sense, have been less rapid in a waxless coating. Nor was the point put to Mr Godfrey in cross-examination.

In addition, none of the experts had mentioned “charring” of the coating as a hazard to be avoided.

In the light of the judge’s construction of the patent (which, as we have said, we consider to have been correct) we do not, with respect, agree with him that the evidence supported the finding that this possible theoretical benefit of a coating with wax had been proven to be a practical benefit present in Thorn’s coating.

The judge expressed this finding as follows:

“…there would be a noticeable difference if one were using a lower temperature soldering iron…”

Although the judge did not explicitly say that the noticeable difference he had in mind was a difference in ease of penetration of the coating, it is common ground that that is what he meant. The principal basis for this finding was the evidence of Mr Godfrey. This claimed advantage based on the use of a lower temperature soldering iron was not a claimed advantage that had featured in the way that Siemens had opened its case. Neither of the experts called by Siemens suggested that the possibility of repair using low temperature soldering irons was a real benefit of the invention. So this finding was based entirely on answers extracted from Mr Godfrey in cross-examination. The judge had accepted Mr Godfrey’s evidence that there was no material practical difference between the waxed product and the waxless product in relation to a soldering iron at a normal temperature (paragraph 71 (ii)). What, then did Mr Godfrey say about lower temperature soldering irons? His first reference in cross-examination was to repair. He said that in order to repair a PCB you would remove the coating “by using heat, a hot air gun or thermostatically-controlled soldering iron, so you can get at the faulty component.” (Day 5 p. 143). However, this part of his evidence did not refer to the temperature at which the hot air gun or thermostatically controlled soldering iron might operate. It does not, therefore, bear on the question whether a lower temperature soldering iron would be used. On p. 170 there was the following exchange:

“Q. If you are reducing its softening temperature or melting temperature, it is always going to be easier, is it not, to push something hot through it?

A. It depends what you call "easier". When you have something that is above 300 degrees Centigrade in normal use going into a film with a softening point around 120 to 170 degrees C, there is no comparison. If you were going to try and push something into it that is around 200 degrees C, then there is a difference. But because the temperature of the soldering rod is so extreme compared to the plastic material, there would be no real comparison.”

A few minutes later there was the following exchange:

“Q. So you are reducing the viscosity and improving the wetting by adding the wax you are going to facilitate pushing something through the coating, are you not?

A. Yes. But the way -- if we are using the soldering example, the difference between the temperature of the solder rod and the softening point of the material is far apart. If there was a case where you were already 20 degrees above the softening point of the film you would then be able to gently push the film apart and even possibly use the tip of the soldering rod to actually cut into the film and control what you are doing. But if you are going to talk about typical, standard soldering operations this is going to make no difference because your temperature differences are so extreme.”

Mr Godfrey repeated his evidence that at normal soldering iron temperatures there was no practical difference between a waxless coating and a coating containing wax. But he did refer to a lower temperature soldering iron in the following exchange:

“Q. If it is closer to its melting point it is going to liquidate more easily, is it not?

A. If the -- if you are looking at controlling the temperature of a soldering iron or using a lower temperature soldering iron to [push] through, which is closer to the temperature of the melting point, then, yes, you would get that, but when you have one soldering iron at a fixed temperature of a particular job soldering and try and do it, the amount of wax that changes because you are down around 120 to 170 degrees C it is going to make no real difference because thermoplastics, it is going to melt and run away.

Q. So it is all a question of degree?

A. It is a question of degree, yes.”

The question for the judge was whether the claimed practical benefits of the patent were present in Thorn’s product. It seems to us, therefore, that unless there was a practical possibility of a lower temperature soldering iron being used to carry out soldering operations on the Thorn product, no practical benefit would have been demonstrated. Mr Purvis complains that in so far as Mr Godfrey said anything about lower temperature soldering irons, it was purely hypothetical. It has not been shown that lower temperature soldering irons exist in the real world. Mr Purvis further argues that it was not shown that the solder used in the Thorn product was low melting point solder. That is true. He says that without such evidence (and a concomitant finding of fact by the judge) infringement has not been proved. We agree. Mr Godfrey’s evidence, which we have quoted, was a theoretical and generalised discussion; not targeted at Thorn’s product containing no more than 5 per cent wax, and with a melting point of less than 100^o C. Mr Godfrey’s evidence was that whether there was any practical benefit was a question of degree; but whether the requisite degree existed in Thorn’s product was not explored further. Whether or not lower temperature soldering irons exist in the real world (and we have no reason to doubt that they do) the question was whether the existence of a lower temperature soldering iron meant that the ease of penetration of the coating by such a soldering iron was a practical benefit that existed in the Thorn product. In our judgment Mr Godfrey’s evidence does not support the conclusion that it does. Indeed the description of a repair of the Thorn product in the PPD specifically states that the soldering iron is set at 380^o C. There was no challenge to the PPD in this respect. Mr Miller argued that a repair might be carried out using a low temperature soldering iron to penetrate the coating, before switching to a normal temperature soldering iron to carry out the repair itself. But this, too, is in our judgment, a purely theoretical scenario, which would (at least) have had to have been put to the experts before it could have led to a finding of a practical benefit. Mr Miller also argued that the PPD described removing the coating with a hot air gun; and that this might support the judge’s finding. However, the judge’s finding specifically related to a lower temperature soldering iron (rather than a hot air gun); and in any event although a hot air gun was mentioned, there was no evidence about the temperature at which a hot air gun would operate.

We have been persuaded by Mr Purvis that this finding cannot stand.

The judge expressed the third finding as follows:

“if one were using a technique for removing the coating (which is a prelude to the actual activity of through-plating) such as Thorn's hot air gun, the waxed product would probably move aside more readily with less heat being applied.”

The judge said that this finding was not directly addressed in the evidence but was a sensible inference to draw from it.

Mr Miller argues that the judge may have underestimated the extent of the evidence on this point; and in particular the evidence of Mr Godfrey in cross-examination. We have already quoted part of the exchange, but it is convenient to repeat a bit more of it:

“A. Yes, but you would actually effectively remove the coating. The way I would consider repair is you remove the coating by using heat, a hot air gun or thermostatically-controlled soldering iron, so you can get at the faulty component. You can repair that component. But you will need to put a patch of the thermoplastic film back on over to guarantee you have a full coating there.

Q. That repair would be made easier, would it not, by having added the wax, it is going to be easier to take the coating off?

A.

The repair would be made easier by having added the wax because you have softened the film, you have made the film softer, therefore it is more easy to remove.”

The judge did not rely on this exchange in coming to his conclusion on the third of the findings. In fact reading more of Mr Godfrey’s cross-examination immediately following the quoted passage, it is by no means clear precisely what he was saying. On one entirely plausible view of his answers taken as a whole, he was saying that the presence of wax in the coating made it more difficult to remove the coating. This is an instance where the judge had the advantage of hearing the evidence, and assessing the import of Mr Godfrey’s answers on this point taken as a whole. We do not consider that we should interfere with the judge’s conclusion that there was no direct evidence on the point. The question is, therefore, was the judge wrong in drawing the inference he did?

Mr Purvis complains that this inference drawn by the judge was actually contradicted by other findings of fact that he made. The judge had found, at a theoretical level, that the addition of wax to the coating both reduced its viscosity and reduced its surface tension thus increasing it wettability. The former characteristic made it runnier and the latter made it stickier. The extent to which these two countervailing characteristics of the coating with wax balanced each other would have been a matter for expert evidence; but the experts did not address the question.

The drawing of inferences is, of course, a familiar technique in judicial decision making. It enables a judge to conclude that, on the basis of proven facts A and B, a third fact, C, was more probable than not. In drawing inferences in this way the judge applies his or her knowledge as a person of ordinary awareness of the way that people behave, or the way that things work. However, once the subject-matter of the inference is a matter of technical or scientific evidence, for which the evidence of experts is necessary, a judge should be cautious before drawing any inference that the experts themselves have neither drawn nor commented on. It is precisely because the subject-matter is outside the ordinary experience of the tribunal that expert evidence is necessary in the first place. So ordinary experience is unlikely to be a reliable guide to the drawing of technical or scientific inferences. It may well be that a judge is entitled to draw a necessary inference from scientific or technical evidence. But the judge in the present case did not regard the inference he drew as a necessary one. He regarded it as no more than a sensible one.

In our judgment the inference that the judge drew was not, with respect, one that he should have drawn. There were two characteristics of a coating with wax that pointed in opposite directions: lower viscosity and increased wettability. What overall effect those competing factors had upon the coating was, in our judgment, a question for direct expert evidence and was not a matter upon which an inference could safely have been drawn.

Accordingly, in our judgment, Siemens failed to prove that this integer was present in Thorn’s product.

The second disputed integer was that part of the claim which said that the film:

“is fused onto the printed circuit board by the action of heat”.

Based on his construction of this part of the claim, the judge went on to consider whether Thorn’s product contained this integer. He held that it did. His conclusion was not based on evaluating the evidence that he heard; but was based on his interpretation of the PPD. The relevant parts of the PPD are:

“i)

During the process the pressure pad is maintained at a temperature of between 50° and 80°C "to ensure that the polyolefin sealant patch material is at an optimal condition to achieve good adhesion to the printed circuit board and adopt the contour of the various SM [surface mounted] components.."

k)

The silicone moulded pad presses the polyolefin sealant patch into intimate contact with the underside of the PCB so that it adheres to its contour.”

The judge expressed his conclusion as follows:

“75 Yet again this part of the case is bedevilled by a failure to carry out more direct experiments to prove the point in issue, so that the claimant's case is dependent on evidence of how the experts would expect the product to behave under certain circumstances rather than direct evidence of how it did behave under the conditions in question. It was certainly proved that by the time the Thorn film reached 50ºC it had started to melt in the sense of becoming flexible. The hotter it got, the softer it got. Its flow properties improved. What was not demonstrated was that if placed over a board it would flow unassisted at temperatures within the range so as to adhere to the board and furthermore to achieve a virtually air-tight and moisture proof seal. If it had been proved that the application of the temperature alone would inevitably have had those effects and results then the assistance of pressure and vacuum would not have prevented infringement. However, that was not done. But for one point we are left to ascertain the effect of the heat from inferences from the general properties of the product.”

The critical finding in that paragraph was that Siemens had not proved that Thorn’s product:

“if placed over a board it would flow unassisted at temperatures within the range so as to adhere to the board and furthermore to achieve a virtually air-tight and moisture proof seal.”

Thus the judge found that Siemens had not proved that the coating was fused onto the board “by the action of heat”. Why, then, did he hold that this integer was present in Thorn’s product? Direct evidence having failed, again it was a question of the judge’s inferences from the general properties of the product. He supplied the gap by reference to the PPD. This in itself was not objectionable. He reasoned as follows:

“76 That one point is paragraph (i) of Thorn's product and process description, set out above. It seems to me that on the true construction of the patent the application of heat in this integer is to achieve two things. First, it causes a melting (softening) so that the film comes into close conformal contact with the board and its population, and second it gives rise to adhesion so that it stays there. In Claim 1 those two things are produced by the effect of heat alone. In Claim 10 there is a prior step of pressing on to the modules by means of a silicone plug to produce a tight fitting topography and displace residual air, and then as a final process there is fusion under the action of further hearing, but the last step is the same – the final step of producing a conformal coating and adhesion is achieved by heating. This is borne out by one of the preferred embodiments in the specification, which essentially describes the events in Claim 10. If one turns to paragraph (i) of the product and process description one finds both those factors described as part of the Thorn process – the temperature is maintained at 50º - 80º "to achieve good adhesion to the printed circuit board and adopt the contour of the various SM components". That seems to me to be describing this integer. Thorn is there describing the significance of the heat – it is the heat that achieves the final desired result. It is true that the pressure is also described as making the film adhere to the contour of the PCB, but I consider that when the process is put together in the proper sequence it is the heat that does the final job, as described in claim 1 (and, incidentally, in Claim 10).”

However, the quotation from paragraph (i) of the PPD on which the judge based his conclusion is not a full quotation of that paragraph. Selectively quoted it gives the impression that the heating of the sealant patch material is done in order to enable it to adhere to the PCB without more. But that is not what the PPD says. The heating is applied in order to ensure that the sealant patch material is in optimal condition to adhere to the PCB. In other words the heating produces a condition; not the adhesion or fusion itself. The adhesion itself is produced by the subsequent step of pressure “so that it adheres” to the contour of the PCB. The purpose of the pressure is to cause the adhesion. As the judge correctly pointed out, claim 10 of the patent in suit describes a process in which the softened film is pressed onto the modules; but as he also correctly pointed out, even in that process the final adhesion is caused by a second heating. When the judge said that it was necessary to put the process together in the “proper sequence” it seems to us that what he was in fact doing was altering the process or sequence that was described in the PPD; and thus attributing to the function of heating described in the PPD a consequence or effect that it did not have. Although the judge said that it was the heat “that does the final job”, it was in fact, according to the PPD, the application of pressure that did the final job. The fusion thus took place by the application of pressure; not by the action of heat. Without the application of pressure, on the judge’s own findings, there would have been no adhesion and hence no fusion. It may well be that the fact that Thorn’s product does not fuse by the action of heat is attributable to the fact that its wax content is only 5 per cent, whereas the patent specification envisages a range of 10 to 30 per cent wax, with a preference for 30 per cent. However, we need not speculate about the reason. For the reasons given, we have been persuaded by Mr Purvis that on the judge’s construction of the patent this integer was not proved to be present in Thorn’s product either.

It follows in our judgment that Thorn’s product did not infringe claim 1. In case, however, a higher court is of a different view on the Infringement Issue, we shall deal with the Assignment Issue. It was fully argued before us and it arose on the judge’s finding of infringement. It is, moreover, a point which has not previously been considered by this court.

We now turn to the Assignment Issue.

The application for the patent was made in the name of Cerberus AG, a company incorporated under Swiss law. On 30 January 2002, Cerberus AG filed with the Patent Office a form showing that the new owner of the patent was Siemens Building Technologies AG, which was also incorporated under Swiss law. On 11 March 2005, Siemens Building Technologies AG gave notice to the Patent Office that that company had been merged with the claimant in the action and the respondent to this appeal, Siemens Schwiez AG.

The alleged infringements occurred from 1998 onwards. The question that the judge had to consider was whether Siemens Schweiz could sue for infringements before 25 February 2002. That depended on the effect of section 68 of the 1977 Act which, as originally enacted, provided:

“68Effect of non-registration on infringement proceedings

Where by virtue of a transaction, instrument or event to which section 33 above applies a person becomes the proprietor or one of the proprietors or an exclusive licensee of a patent and the patent is subsequently infringed, the court or the comptroller shall not award him damages or order that he be given an account of the profits in respect of such a subsequent infringement occurring before the transaction, instrument or event is registered unless—

(a)

the transaction, instrument or event is registered within the period of six months beginning with its date; or

(b)

the court or the comptroller is satisfied that it was not practicable to register the transaction, instrument or event before the end of that period and that it was registered as soon as practicable thereafter.”

The words in italics have now been replaced by the words “in proceedings for such an infringement, the court or comptroller shall not award him costs or expenses” (Intellectual Property (Enforcement etc) Regulation 2006), which were designed to implement art 13 of the Enforcement Directive 2004/48/EC. It is not suggested that anything on this appeal turns on this amendment. The 1977 Act does not define the term "proprietor", but, by inference he is the person who owns the patent.

Section 68 refers back to section 33. That section deals with priorities between various holders of patents. S 33 provides:

“33Effect of registration, etc, on rights in patents

Not all of “the transactions, instruments or events”, described in s 33(3), lead to a person becoming the proprietor or an exclusive licensee of a patent. For example, a person may not become a proprietor by becoming the person in whose favour security is granted. The incorporation of s33(3), by reference into s 68 is, therefore, imperfect.

We need also to set out s 30 of the 1977 Act, which played a crucial part in the judge’s reasoning. S 30 provides:

“Property in patents and applications, and registration

30Nature of, and transactions in, patents and applications for patents

(1)

Any patent or application for a patent is personal property (without being a thing in action), and any patent or any such application and rights in or under it may be transferred, created or granted in accordance with subsections (2) to (7) below.

(2)

Subject to section 36(3) below, any patent or any such application, or any right in it, may be assigned or mortgaged.

(3)

Any patent or any such application or right shall vest by operation of law in the same way as any other personal property and may be vested by an assent of personal representatives.

(4)

Subject to section 36(3) below, a licence may be granted under any patent or any such application for working the invention which is the subject of the patent or the application; and—

(a)

to the extent that the licence so provides, a sub-licence may be granted under any such licence and any such licence or sub-licence may be assigned or mortgaged; and

(b)

any such licence or sub-licence shall vest by operation of law in the same way as any other personal property and may be vested by an assent of personal representatives.

(5)

Subsections (2) to (4) above shall have effect subject to the following provisions of this Act.

(6)

Any of the following transactions, that is to say—

(a)

any assignment or mortgage of a patent or any such application, or any right in a patent or any such application;

(b)

any assent relating to any patent or any such application or right;

shall be void unless it is in writing and is signed by or on behalf of the parties to the transaction (or, in the case of an assent or other transaction by or on behalf of a personal representative) or in the case of a body corporate in so signed or is under the seal of that body.

[(6A)     If a transaction mentioned in subsection (6) above is by a body corporate, references in that subsection to such a transaction being signed by or on behalf of the assignor or mortgagor shall be taken to include references to its being under the seal of the body corporate.]

(7)

An assignment of a patent or any such application or a share in it, and an exclusive licence granted under any patent or any such application, may confer on the assignee or licensee the right of the assignor or licensor to bring proceedings by virtue of section 61 or 69 below for a previous infringement or to bring proceedings under section 58 below for a previous act.”

The judge described the mergers which had taken place in the Siemens group at [81] and [91] to [97] of his judgment. It is not necessary for us to repeat the details. The material elements of the transactions were that on the occasion of each merger there were the following steps: (1) the merging parties entered into an agreement to transfer all the assets and liabilities of the merging company to the acquiring company in accordance with art 748 of the Swiss Code of Obligations Governing Corporations (“the Swiss Corporations Code”); (2) that agreement was approved at general meetings of (at least) the merging company; (3) the relevant documents were then filed with the Swiss Commercial Registry; and (4) upon registration of the filing of the relevant documentation, the assets and liabilities were as a matter of Swiss law vested in the acquiring company. It then manages the assets of the merging company. (It is not clear on the evidence whether the beneficial ownership passed to the receiving company immediately on registration of the documentation, or whether it only did so when the creditors of the merger company had been paid or provided for. But that point goes only to timing and is of no consequence in this case.) The essential point is that in the words of Professor von der Crone, the expert on Swiss law whose evidence the judge accepted:

“In the moment that the merger is registered in the commercial register, the whole legal estate of the transferring company is uno actu transferred automatically to the surviving company. All of the rights and liabilities of the transferring company are transferred and two-sided legal relationships are transferred without the other party's consent.”

Professor von der Crone explained in cross-examination that the doctrine of universal succession had its origins in the law of inheritance under which the assets and liabilities of the deceased vest in the appropriate person by operation of law. The interests of the creditors are not protected by an order of the court approving the merger (as would be the case under s 900 of the Companies Act 2006) but the members of the board of directors of the acquiring company are personally liable for the separate administration of the assets of the merging company (art 748 of the Swiss Corporations Code).

If the required documents are filed with the registrar under art 748 of the Swiss Corporations Code, the registrar cannot refuse to make the relevant entries on the commercial register. He only exercises a judgment relating to “whether the formalities are correct (or whether all the required information is provided, or whether the applicant has the necessary authority).” Article 748 is not a provision which deals with mergers, but with dissolution, and it has been adapted by interpretation for use in connection with mergers.

Most takeovers in the United Kingdom are by share exchange and so this form of reorganisation is not well known in the United Kingdom. It is, however, very different from a sale of the undertaking and assets of the company. That would not be effective to transfer liabilities, nor would it involve the dissolution of the merging company. Moreover the parties can chose the proper law of a contract for the sale of assets. By contrast, a merger can only take place under the law of the place of incorporation. It involves a change of the status of the merging company: see generally National Bank of Greece and Athens SA v Metliss [1958] AC 509. In this case, there were no appraisal or other rights given to the shareholders because the merging company was a wholly-owned subsidiary of the acquiring company.

The judge rejected an argument by Siemens that the amendment to s 68 was retrospective ([84] to [90]). There is no appeal against his ruling on that point. When he came to consider whether the merger constituted an “assignment” within s 33(3), he proceeded by a series of strictly logical, stand alone steps. He held that the merger agreement did not assign any patent. (He accepted as a matter of fact that this was so notwithstanding a decision of the Swiss Supreme Court, as Professor von der Crone considered that that case was wrongly decided). He held that the merger agreement was analogous to an agreement to transfer the property which was in due course completed by the example a conveyance. He held, following his earlier decision in Tamglass Ltd OY v Lyoyang Glass Technology Co Ltd [2006] EWHC 655 (Ch), that an assignment had to be an express consensual bilateral document transferring a patent. He held that it was not enough that, under the Swiss doctrine of universal succession, a merger agreement was essential. He held that, if the word “assignment” had the wider functional meaning contended for by Thorn, it would include the vesting of property on death or pursuant to a court order. An assignment had to take place under the assignment, not pursuant to it.

The judge also rejected the argument that s 33(3)(e) applied. He held:

“No authority ordered or directed anything. The evidence is plain. The registering authorities received the information relating to the mergers and entered it on to the register. Their function was administrative, not directive. The authorities did not direct that anything should happen. They merely made an entry which they were obliged to make, and which had certain legal consequences.” ([105])

The judge's reasoning incorporated his reasoning in Tamglass. The ratio of that case on s 33(3)(a) is that it followed from s 30(3)and (6) of the 1977 Act that there had to be a consensual document in the nature of a consensual bilateral transaction. He also rejected an argument based on s 33(3)(e). On the evidence of Finnish law in that case, the registration authority had to give permission for implementation of the merger but the merger itself resulted merely from notifying that authority of the implementation of the merger within four months after the grant of permission.

The judge recognised that the result was anomalous. The purpose of s 68 is to ensure that “the people who own the monopolies get on the register” per Jacob J in LG Electronics v NCR Financial Solutions Group Ltd [2003] FSR 24 at [18]; see also Molnycke v Proctor& Gamble [1994] RPC 49 at 109 per Morritt J. The effect of the judge’s ruling was that a well-recognised event in corporate terms fell outside the protection intended to be afforded by s 68. His judgment is described in the grounds of appeal as having “opened up a large lacuna in which the purpose of [s 68] is defeated”.

On this appeal, Mr Purvis submits that the judge should have given s 33(3) a more purposive interpretation. He relies on the following passage from the Report of the Committee to Examine the Patent System and Patent Law chaired by M A L Banks (1970) (Cmnd. 4407):

“560.

Clearly it is most important for the proper functioning of the patent system that information concerning ownership of, and other interests in, patents should be as readily available as possible. Thus, in principle we are sympathetic to suggestions made to us in evidence that the register should contain more information than it does at present. However, we have also borne in mind that the register should not become overloaded with information of little or no value, and that a requirement that information should be registered is dependent upon an effective sanction in the event of non-compliance with the requirement. This latter point is one of especial importance and difficulty, since it is generally recognised that Section 74(6) provides no incentive for registration unless Court proceedings are imminent, when the interested party can rectify his omission without penalty. Although we would not wish to abolish the provision of Section 74(6) we think that it should be supplemented by more effective encouragement to the registration of changes in the ownership of patents and the grant of exclusive licences in respect thereof. Ownership of a patent or the holding of an exclusive licence confers the most important of all patent rights, that of bringing an action against an infringer, and it follows that in these respects the register should always be complete and up to date. To encourage registration more actively, we therefore propose that the Patents Act should provide, subject to a grace period of six months for registration, that where a change in ownership of a patent has occurred, or an exclusive licence has been granted thereon, no damages for infringement (or an account of profits in lieu of damages) should be recoverable by the new owner or by the exclusive licensee in respect of infringing acts committed prior to the registration of the plaintiff’s interest.

…

This recommendation applies to any acquisition of ownership, and is not limited to particular kinds of change of ownership. Mr Purvis submits that there is no obvious policy reason for leaving out assignments of the kind in question here. He submits that there is no requirement that the property passes on the date of the signed agreement. There is no policy reason why assignments which are conditional on some further event occurring should be treated differently under s 33 from unconditional assignments. Mr Purvis criticised the judge’s reasoning as over-analytical. In the case of each merger, the transaction viewed as a whole was clearly an assignment. The judge’s reasoning also results in a narrowing of s 33 itself. Mr Purvis also relies on s 33(3)(e),

Regarding s.33(3)(a) Mr Miller relies on Tamglass. He further submits thata distinction is to be drawn between an agreement to assign and an assignment. The former is not an assignment: see per Jacob J in Coflexip Stena Offshore Limited’s Patent [1997] RPC 179. To become an assignment for these purposes, a separate legal document assigning the patent would be required, as in Casey’s Patents, Stewart v Casey (1892) 9 RPC 9. A mere agreement would not be within s 33(3), and if an agreement were conditional there might be difficulties meeting the six months’ time limit in s 68. In our judgment, Mr Miller’s argument here is not a sound one: s 68 (b) of the 1977 Act caters for the situation where the six months’ time limit is exceeded for some good reason, and the assignments may be conditional just as agreements may be conditional. Mr Miller further submits that any person who searched for the owner of the patent in question would discover that the mergers had taken place. (This would be possible by the simple act of searching the Swiss Commercial Register). Hence, the policy of being able to determine the true owner of the patent has been complied with.

Mr Miller submits that s 30(6) lays down an exclusive method of transferring patents and that an assignment therefore cannot exist which falls outside that provision. Furthermore, on his submission, the only form of devolution by operation of law that is covered by s 33(3) is that occurring on death: see s 33(3)(d).

As to s 33(3)(e), Mr Miller submits that there is no official direction or discretion of the kind to which to which s.33(3)(e) applies.

We turn to our conclusions. The term “assignment” is inherently capable of more than one meaning. It may refer to the passing of ownership or, where parties may only transfer property by executing an instrument in a particular form it can mean that instrument as executed in relation to particular property: see, by analogy, Lyle & Scott v Scott’s Trustees [1959] AC 763. This case deals with the different meanings of “transfer” in relation to the articles of association of a company and shares held on a share register. "The context must determine in what sense the word is used.”: per Lord Reid at 778. So too the word “assignment” may refer to the instrument of transfer of a patent, which must follow the minimal requirements of s 30(6), or the vesting of an absolute interest in it in another person. The judge was right to look at other uses of the term “assignment” in the 1977 Act, but where a statutory provision is intended to meet a specific mischief or has a different history from another provision, statute may not use the same term consistently (see, for example, Giles v Rhind (No 3) [2008] 1 BCLC 1 1103 at [50], Gingi v Secretary of State for Works and Pensions [2002] 1 CMLR 587).

A striking feature in the present case is the recommendation of the Banks Committee, set out above. The interpretation of a statute is a deductive exercise based on close examination of the precise words that Parliament has used, but the process still requires a cross-check to be made of the result of a literal wording against any internal or (where admissible) external clues as to the effect of the provision. The judge’s reasoning as a pure exercise in deductive logic cannot be faulted, but in our view he failed to cross-check his answer on a literal approach against those internal and external clues. Those clues have led us down a different trail. The clues all go in the direction of warning against a narrow literal approach.

The first clue is of course the Banks Committee report. That report, which led ultimately to the enactment of the 1977 Act, is admissible on a question of statutory interpretation in relation to any implemented recommendation to show the mischief to which s 68 is directed. It is self-evident that Parliament in adopting the Banks Committee’s recommendation set out above intended s 68 to be, so far as possible, all-embracing and not to have obvious lacunae. The strong recommendation of the Banks Committee which led to s 68 mandates a purposive reading of s 33(3) to give effect to the mischief it identified, if that can be achieved.

There are also significant internal clues. The opening words of s 33(3) are “transactions, instruments or events”. These individual components of this phrase are wide and open-textured and so the combination of them in the opening words can be taken as an indication that, so far as possible, s 33(3) is intended to be comprehensive. There is no reason why an assignment, if given a wide meaning, should not be an instrument in some circumstances and an event in other circumstances, or a combination of an event and an instrument in other circumstances. The opening words of s 33(3) contrast with the words used in, for example, s 30(6), which are limited to assignments, mortgages and assents.

A further interpretative clue is found by considering the effect of the judge’s interpretation on s 33 itself. S 33 addresses the problem of priorities when a person acquires an interest in a patent when a prior interest has been created which has not been registered and of which he is unaware. Section 33 lays down rules for that purpose. There would be no purpose in limiting those rules to assignments which qualified as consensual bilateral documents. Like s 68, s 33 should have as wide a field of operation as is consistent with the words used.

Another interpretative clue of a comparative minor nature is to be found in s 40 of the 1977 Act. This refers to contracts of assignment. This suggests that there is a narrower sub-group of assignments which constitute contracts of assignments.

The judge was strongly influenced by the references to assignment in s 30(6). But this subsection has to be read closely. At first blush, it suggests that an assignment can only be by way of bilateral consensual agreement, but it is indisputable that assignments can also be by operation of law. The facts of this case demonstrate that. Moreover, the references to assignment in s 30(6) are not in fact limited to bilateral consensual documents. They can be deeds poll, as where a person decides to give a patent to another person, or vest it in him in the administration of a deceased’s estate. The other person need not be a party to that document or assent. The word “assignment” in s 30(6)(a) has, therefore, to be read as referring only to those forms of assignment which can take effect by a document complying with the formalities in s 30(6). S 30(6) is accordingly not the silver bullet mandating a narrow interpretation of s 33 (3). It would, moreover, make a nonsense of ss 33 and 68 if the disponor under an assignment taking effect by operation of law could delay the operation of those sections by claiming that those sections operated only when a document falling within s 30(6) had been executed reflecting the effect of an assignment by operation of law which had already taken place. Once the meaning of "assignment" is liberated from its meaning in section 30 (6)(a) and the link with s 33(3) which the judge’s reasoning imposed, there is no reason why the word "assignment" should not receive a wide meaning in s 33(3). In our judgment it is wide enough to include an assignment by operation of law, certainly an assignment by operation of law of the kind involved in universal succession following a merger. There is nothing in s 30(3) to indicate that this conclusion is not correct: on the contrary, it would be odd if the true interpretation is that sub-section refers expressly to the vesting of patents by operation of law (it would appear, by implication, by any means), but deals with such vesting in the remainder of that sub-section and in s 33(3) only when it occurs on the death of an individual. Yet that is the result to which the judge’s interpretation would lead.

It is not necessary for us to deal with all the circumstances in which a patent can be assigned by operation of law. If the proprietor of a patent is an individual who becomes bankrupt under English law, his assets will vest in a trustee in bankruptcy by virtue of s 306 of the Insolvency Act 1986. If a corporation is dissolved its assets will vest by operation of law in the Crown (s 654 of the Companies Act 1985, which is to be repealed and replaced by s 1012 of the Companies Act 2006). In these situations, the position may be that there is no assignment for the purposes of s 33(3) until the trustee in bankruptcy, or the Crown (as the case may be), assigns the assets to third party. But if that were the position, it would be analogous with the position on death under s 33(3)(d). Those questions will have to wait until another day. To take up a separate point made by the judge, we do not consider that s 33(3)(d) stands in the way of the interpretation which we have adopted since its purpose may be to postpone the need to register a change of ownership until the period of administration of the estate has been completed. No disposition of the patent can be made until that date.

The transfer of assets in this case was effectively a return of assets in liquidation. The merger effects a change in the status of the merging company but that does not mean that the merger cannot involve some other legal step, such as a return of assets: see, generally, Sun Alliance Insurance Ltd v IRC [1972] Ch 133. No argument has been addressed to the word “assignation” in s 33(3)(a). This word does not appear in s 30. In our view, the word “assignation” does not stand in the way of the interpretation we consider to be correct. Nothing in this judgment undermines the conclusion in Coflexip that a mere agreement to transfer a patent, which is not (or not yet) followed by a formal assignment of itself does not fall within s 33(3). We accept the argument that to reach a different conclusion on that point might lead to uncertainty in practice.

As to s 33(3)(e), we do not need to decide the meaning of this provision and need only express the following provisional views. The registrar of the Swiss Commercial Register is clearly an official who, dependent on his powers, is capable of being described as a competent authority. However, the fact that the registrar has to decide whether the documents that have been filed are adequate or not is not a direction which results in the transfer of a patent taking place. The transfer takes place as a result of the Swiss Corporations Code. Furthermore, the registrar’s act is of a ministerial nature. As we see it, section 33 (3)(e) was intended to cover the case where the order or directions are dispositive and involve the exercise of some discretion conferred by law. S 33(3)(e) would on this basis include a vesting order made by a court in favour of a shareholder or creditor of a dissolved company following the dissolution of a company, which had caused its assets to be vested in the Crown as bona vacantia (see, for example, Re Strathblaine’s Estates Ltd [1948] Ch 228). There is no duplication between s 33(3)(a), as we have interpreted it, and s 33(3)(e) because the latter refers to a specific type of assignment which is not one which is merely by operation of law but involves, as we have explained, the exercise of some judgment on the part of the court or competent authority.

For the reasons given above, in our judgment the judge was in error and his decision on s 33(3) in this case must be set aside. We also overrule his decision on s 33(3) in Tamglass.

For the above reasons we allow the appeal on the Infringement Issue and the Assignment Issue and dismiss the respondent’s notice.