AP Racing v Alcon Components

This is an appeal against the Order of His Honour Judge Hacon, sitting as an Enterprise Judge of the Intellectual Property Enterprise Court (“the IPEC”) dated the 17^th June 2015. That Order gave effect to a judgment handed down on the 15^th May 2015. Judge Hacon declined to strike out a claim for patent infringement on the basis of Henderson v. Henderson abuse of process in respect of certain products which he referred to as “the 7 Calipers”.

The background facts are as follows. There had been a trial of validity and infringement of the patent in suit in the Patents County Court; [2013] EWPCC 3. There was an appeal from the resulting Order; [2014] EWCA Civ 40; [2014] R.P.C. 27; and the patent was found to be valid and infringed by certain calipers of the defendant (“Alcon”).

Before the case was transferred to the Patents County Court, Kempner & Partners, acting on behalf of the patentee (“AP Racing”), wrote a letter dated 26^th May 2011 to Wragge & Co., acting on behalf of Alcon, objecting to the transfer. In that letter they said:

“Our view is that the dispute is not suitable for the Patents County Court, on the basis of the complexity of the issues raised (particularly given that you have said you will raise added subject matter issues) and the likely level of damages. We do not, however, have all the necessary information to make a final decision on this issue. Please would you therefore provide:

Information as to other products manufactured by your client which contain the same features as found in the products. In this regard, our client is aware of your client’s products PC 1106, 1107 and 1111-1113, which appear to be very similar to the Products, and our client strongly suspects that those products are also infringing;”

That letter raised the question in the context of the likely level of damages in respect of of other products manufactured by Alcon containing the same features as found in the products which were alleged to infringe and, in my judgment, made it clear that AP Racing did not know of all such products and was asking for information (which Alcon undoubtedly did know), as to any other products which might infringe.

The response to that letter, dated the 1^st June 2011, was as follows:

“In terms of determining the value of the claim, the nature and extent of the information your client has requested extends far beyond that which a Court would need in order to determine the issue. Indeed, it is, in our view, less of a genuine attempt to determine the value of the claim and more of a fishing expedition in confidential financial information relating to a competitor’s business”.

Accordingly, no further information was provided about other products manufactured at that date by Alcon which might infringe the patent. However, the evidence before Judge Hacon established that there were further calipers manufactured and distributed by Alcon at that date which at least arguably infringed the patent, namely, the 7 Calipers.

The evidence establishes that, at the time of that correspondence, AP Racing was unaware of the 7 Calipers, and was unaware of them at the date of the first Case Management Conference (“CMC”) which took place in 2012. The Judge found that AP Racing had had opportunities to observe these calipers at trade shows, but it had not done so. When it subsequently discovered the 7 Calipers, in January 2014, AP Racing initially wished to have them included in the damages inquiry and proposed that the judge at the inquiry should decide associated issues of infringement. Alcon refused to accede to that proposal. In particular, by a letter dated the 3^rd October 2014, in response to a suggestion that the 7 Calipers could not be included in the damages inquiry because, according to Alcon, it would be an abuse of process to do so, Kempner & Partners set out the correspondence from 2011, to which I have just referred, and said:

“It is clear, therefore, that our client could not possibly have included any other calipers in the liability trial in the PCC. In these circumstance, there would appear to be two options open to the parties. Either the additional calipers fall for consideration in the inquiry as to damages (including, of course, the consideration of whether they fall within the claims of the patent) or our client is permitted to issue another claim in respect of them. Please let us know if you disagree, and if so explain why”.

Alcon did not agree with either of these proposals.

In 2015 a further action was started by AP Racing against Alcon in respect of 3 calipers which had not been manufactured at the time of the first proceedings (“the 2015 Proceedings”). It is common ground that the claim in respect of those 3 calipers will have to go to trial.

The 7 Calipers were also included in the 2015 Proceedings. According to Alcon, that constitutes an abuse of the process of the court. Therefore, the application before Judge Hacon was to strike out a part only of the 2015 Proceedings. Furthermore, it was not alleged by Alcon that the claim in respect of the 7 Calipers could be struck out on the basis that infringement was unarguable. It was common ground, and in any event I find, that I must proceed on the basis that there is an arguable case of infringement (just as there is an arguable case of non-infringement) in respect of the 7 Calipers.

In his judgment at [49] Judge Hacon concluded as follows:

“Looking at this from the point of view of whether a determination of infringement in relation to the 7 Calipers would unjustly oppress or harass Alcon, since AP Racing would - as a matter of usual patent practice - have been entitled to such a determination in the inquiry on the present facts, I do not see how there could be unjust oppression or harassment”.

In other words, Judge Hacon made a finding that, in accordance with the usual patent practice, AP Racing would have been entitled to introduce the 7 Calipers into the damages inquiry, infringement having been established in respect of certain other calipers manufactured by Alcon. In those circumstances he could not see why it would be unjust or oppressive to Alcon to introduce them into the 2015 Proceedings, which would have to be tried in any event.

AP Racing contends that his decision was correct and support the conclusion at [49]. However, by a Respondent’s Notice, AP Racing contends that other parts of Judge Hacon’s judgment suggest that the usual patent practice, whereby the patentee pleads certain alleged infringements and if the patent is found valid and infringed, it is thereafter possible to introduce other examples of infringement at the damages inquiry, should not be followed in the IPEC; and that it is more likely in the IPEC than in the High Court that a patentee who does not list all possible infringements at the first CMC may be debarred from claiming in respect of them in a subsequent damages inquiry. AP Racing contends that although Judge Hacon’s decision is right, his reasoning in those respects was wrong, and that this provides additional reasons for upholding his ultimate conclusion.

I turn now to those parts of the judgment where the Judge has set out the law in relation to abuse of process. At [8] the Judge cites the well-known passage from the speech of Lord Bingham of Cornhill in Johnson v Gore Wood & Co [2002] 2 AC 1 at page 31. Lord Bingham said:

“It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before”.

That, in my judgment, is the test that Judge Hacon applied, correctly, in this case. At [9] he quoted from Lord Millett in the same case at pages 59 to 60. Lord Millett said:

“It is one thing to refuse to allow a party to relitigate a question which has already been decided; it is quite another to deny him the opportunity of litigating for the first time a question which has not previously been adjudicated upon. This latter (though not the former) is prima facie a denial of the citizen’s right of access to the court conferred by the common law and guaranteed by article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms. While, therefore, the doctrine of res judicata in all its branches may properly be regarded as a rule of substantive law, applicable in all save exceptional circumstances, the doctrine now under consideration can be no more than a procedural rule based on the need to protect the process of the court from abuse and the defendant from oppression”.

That is an important passage in relation to the matters which I have to decide on this appeal. AP Racing submits that the Judge did not attribute sufficient weight to the fact that it is not seeking to re-litigate a question which has been decided against it. On the contrary, AP Racing has succeeded in its allegations of infringement of patent. To have excluded these further alleged infringements would have denied AP Racing the right to a trial in respect of them, potentially in infringement of article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms. P Racing submits that it would require very clear evidence of oppression before such a step was taken. I shall return to this issue when considering the Respondent’s Notice.

Judge Hacon then cited a passage from the judgment of the Court of Appeal in Aldi Stores Ltd v. WSP Group plc [2007] EWCA Civ 1260; [2008] 1 WLR 748. At [12] he said:

“The Court of Appeal in Aldi was also concerned to emphasise that if a party to litigation is aware of a claim related to proceedings on foot which it might wish to bring in the future, it should raise the matter with the court to ensure the proper use of court time and the efficient and economical conduct of litigation”.

That principle was explained further by Judge Hacon at [18] where he quoted from the judgment of Sir Anthony Clarke MR in Stuart v. Goldberg Linde [2008] EWCA Civ 2 at [96]:

“For my part, I do not think that parties should keep future claims secret merely because a second claim might involve other issues. The proper course is for parties to put their cards on the table so that no one is taken by surprise and the appropriate course in case management terms can be considered by the judge. In particular parties should not keep quiet in the hope of improving their position in respect of a claim arising out of similar facts or evidence in the future. Nor should they do so simply because a second claim may involve other complex issues. On the contrary they should come clean so that the court can decide whether one or more trials is required and when. The time for such a decision to be taken is before there is a trial of any of the issues. In this way the underlying approach of the CPR, namely that of co-operation between the parties, robust case management and disposing of cases, including particular issues, justly can be forwarded and not frustrated”.

So, both Aldi and Stuart are concerned to prevent parties with actual knowledge of the facts which give rise to future claims from keeping them secret and saving them up for another day. Those cases do not establish that a patentee has a duty to investigate all possible infringements which may have occurred and that a failure to identify all such infringements at the outset of a claim may mean that no relief can be obtained in respect of them.

That is not the law, as was made clear from the Judge’s citation of a passage from the judgment of Lloyd LJ in Aldi, who said as follows at [59] under the heading “Failure to use reasonable diligence”:

“[59] …On the other hand, it does not seem to me that there can be a general principle that a potential claimant is under a duty to exercise reasonable diligence, not yet having brought proceedings asserting a particular claim, to find out the facts relevant to whether he has or may have such a claim. Moreover, I do not see how it can be relevant at all that the claimant may have failed to use due diligence in attending to his own interests at the time of the transaction or the events giving rise to the claims asserted. Unless, on the merits, that is a complete and inevitable defence to the claim, it seems to me to be entirely irrelevant to the inquiry which is necessary under Johnson v. Gore Wood & Co [2002] 2 AC 1.”.

Therefore, in the present case, Judge Hacon correctly concluded at [15] that:

“It is clear that a claimant is under no general duty to exercise reasonable diligence to ascertain whether he has a potential further cause of action against the defendant (or third parties)”.

It is also the case that the knowledge of the defendant as to the likelihood that a subsequent claim may be brought against it is a relevant factor when considering whether the bringing of such a subsequent claim is oppressive to that defendant. That proposition may seem self-evident. Nonetheless, it is established by the judgment of the House of Lords in Johnson v. Gore Wood. The House of Lords overturned the Court of Appeal in Johnson. The Court of Appeal had struck out Mr. Johnson’s personal claim for negligence against his former solicitors on the basis that it should have been brought at the same time as his company’s claim for negligence. However, the defendant knew that Mr. Johnson intended to bring a claim in his personal capacity because he had told them that this was the case. That is why there was no oppression to the defendant when this occurred.

At [20]-[21] of his judgment, Judge Hacon referred to two patent cases, General Tire & Rubber Company v. Firestone Tyre & Rubber Company Limited [1975] RPC 203 and Unilin Beheer BV v. Berry Floor NV [2007] EWCA Civ 364; [2007] FSR 25. I can summarise the practice which those cases record by reference to a passage from Jacob LJ’s judgment at [49]:

“Now it is true that in an inquiry as to damages or account of profits the patentee is allowed to claim relief for types of alleged infringement not ruled on by the trial court. This saves the formal issuance of fresh proceedings in respect of these and is permitted as a matter of convenience, see General Tire and Rubber Co v. Firestone Tyre and Rubber Co Ltd [1975] RPC 203 at 207. And of course if, in the inquiry or account, the patentee alleges a type of infringement not considered by the trial court, the court conducting the inquiry or account will have to rule on whether it falls within the scope of the patent”.

Mr. Cuddigan QC, who appeared for AP Racing, emphasises that this is a well-established practice in patent litigation in the High Court which saves time and costs. He points out that a liability trial almost invariably involves a challenge to validity. If the challenge to validity is successful and the patent is invalidated, then time and money spent on infringement allegations is wasted. Accordingly, he submits that whilst some infringements must be brought forward in order to establish a right to relief, others may be left for subsequent consideration, which is indeed what happened in the General Tire case.

I would add that it is in accordance with the modern approach to intellectual property cases in general that the rights-holder should not be required to produce evidence of every possible infringement in the liability hearing but merely to bring forward sufficient examples so that the case of infringement can be dealt with in a cost-effective and expeditious way. To require the claimant to specify all infringements and to introduce them into the liability trial would be wasteful, time consuming and a recipe for delay.

It follows that I consider that the practice to which Jacob LJ referred in Unilin Beheer of allowing further infringements, once infringement is established, to be considered at the damages inquiry is entirely in accordance with the aims of the IPEC, in particular in accordance with the aims of simplifying trials of infringement, shortening proceedings and rendering them cost-effective.

At [23] of his judgment Judge Hacon said:

“In my view the reforms of civil procedure since General Tire, that is to say the introduction of the overriding objective, which is to be taken together with the directions in Aldi and Stuart as regards the court being informed of a new claim at an appropriately early stage, mean that in the IPEC anyway a patentee is not entitled to anything like the free rein contemplated by Mr. Cuddigan to litigate a broader range of alleged infringements in an inquiry or account. The outcome of an application to raise such further allegations will be heavily influenced by the time at which the patentee first raises this possibility and also by other relevant factors, but as a rule of thumb if the further allegations require the filing of additional evidence of any sort, I think that in this court only in unusual circumstances will the further allegations of infringement be allowed at the trial or inquiry. Any other approach would cut across the need to ensure that proceedings are dealt with expeditiously, fairly and at proportionate cost and would be inconsistent with the directions on correct practice given in Aldi and Stuart”.

I respectfully disagree with the learned judge. The result, as explained by Mr. Campbell QC who appeared for Alcon, would be that in the IPEC, unlike in the High Court, a claimant would be required to come to the first CMC with a complete list of all possible infringements that he had been able to find. If any had been missed out, which could have been discovered by reasonable diligence, and if they required further evidence in order to consider them, the patentee would be debarred from claiming in respect of them. The consequence would be that, in respect of all such further infringements, a free licence would have been granted because no injunction would bite on them and no damages or other relief would be recoverable.

I do not consider that the IPEC is an exception to the general law in this regard. When faced with allegations of abuse of process it must consider whether or not oppression has occurred, in the sense that the defendant has been harassed unfairly by further allegations of infringement. I consider that the practice set out in Unilin does apply to the IPEC. If it turns out that a damages inquiry is unduly complex, then of course it can be transferred by the IPEC to the High Court once liability has been established.

I turn now to apply these principles to the facts. In my judgment that there is no question of any abuse of process in the present case. In particular, AP Racing followed the well-established, cost-effective practice of specifying certain infringements in its pleadings. Indeed, it specified all of the infringements of which it was aware. It is relevant that AP Racing’s solicitors wrote to Alcon’s solicitors asking for information as to other Alcon products with the same features as those in respect of which it was suing for infringement. Alcon did not reply and did not identify the 7 Calipers, although it must have known that it was selling them and it must have known their relevance to the patent, given that it were already being sued in respect of that patent.

Alcon are neither oppressed nor harassed by the inclusion of the 7 Calipers in the 2015 Proceedings. There has been no finding that they do not infringe and it would be a denial of AP Racing’s right to a trial for infringement if they were shut out from claiming in respect of them, particularly in circumstances where Alcon objected to the proposal to include them in the existing damages inquiry.

Alcon is subject to an injunction granted by the Court of Appeal on the 28^th January 2014 in the general form, namely that Alcon be restrained from infringing the patent. If Alcon was successful in its abuse of process argument, then even assuming that the 7 Calipers infringe, they would not be subject to the injunction because it would be an abuse to make this allegation in contempt proceedings. This would not be a fair result, against the background of fact that I have set out.

I then turn to the grounds of appeal which are put forward in the present case. First, Alcon criticises the judge for taking into account the question of whether the 7 Calipers could have been included in the damages inquiry. The reason why this arises is because AP Racing, in the light of objections from Alcon as to inclusion of the 7 Calipers in the damages inquiry, chose to do so in the 2015 Proceedings instead.

Mr. Campbell, in the course if his able submissions, put the point as follows:

“Asking the question as to whether the patentee would have been permitted to add the 7 Calipers if the inquiry boat had not sailed was simply irrelevant. Even if the answer was Yes, the court would still have to consider the question which was actually before the court, i.e. whether the present action was an abuse. Whether or not it would have been an abuse to do something in a different context was irrelevant”.

I disagree with this submission. If, as the Judge held, AP Racing could have included the 7 Calipers in the damages inquiry in the first action in which it had succeeded, it is extremely difficult to see how it could be oppressive to have included them in a second action instead.

The only argument put forward to support oppression is that in the 2015 Proceedings the costs cap which normally applies to actions in the IPEC would not apply because, in effect, the patent has a certificate of contested validity. This does not seem to me to constitute any form of oppression for a number of reasons. First, Alcon was offered a choice in correspondence as to whether the 7 Calipers should be included in the damages inquiry or in the 2015 Proceedings. If there is some form of prejudice as a result of their inclusion in the 2015 Proceedings, that, in my judgment, is the consequence of Alcon’s failure to accept that the 7 Calipers could be litigated at all. Secondly, the costs cap is only prejudicial if Alcon loses. If it wins the action in respect of the 7 Calipers (as Alcon strongly contends will be the case) then the absence of a costs cap is positively to its benefit. Thirdly, Mr. Cuddigan pointed out that if this were relevant prejudice – and I should emphasise that it only relates to costs of part of the action which is going to continue in any event – then Alcon could apply for a costs cap to be imposed. I agree with this and I consider that if Alcon is genuinely concerned about the risk of additional costs, this is a course that it may wish to take. A judge hearing that application, whilst I would not wish to fetter his or her discretion, may consider that a costs cap is appropriate.

I then turn to the second ground of appeal. Alcon asserts that AP Racing’s failure to add the 7 Calipers into the claim at the inquiry stage and, in particular, at the CMC in the inquiry, was an abuse. This is characterised by Alcon as a deliberate choice not to bring the matter to court at the CMC in the inquiry, despite knowing of the claim by that stage. In fact, at the CMC, both Alcon and AP Racing drew attention to the 7 Calipers. The point appears to be that rather than pursuing its claim to include the 7 Calipers in the damages inquiry, AP Racing chose to do so in the 2015 Proceedings.

I do not consider that this constitutes oppression to Alcon. It was at Alcon’s own urging that the 7 Calipers were not included in the damages inquiry. Indeed, it makes no difference to Alcon’s argument, because its position is that the abuse had already occurred well before the damages inquiry, by AP Racing’s alleged failure to include the 7 Calipers at the CMC in the first action in 2012.

The third ground of appeal asserts that even if it were right to consider the question of whether Alcon would have been allowed to introduce the 7 Calipers into the damages inquiry, the Judge answered this question wrongly. Alcon’s argument is that CPR 63.23(2) takes effect to exclude the Unilin practice, save in exceptional circumstances. In particular, CPR 63.23 makes clear that at the first case management conference after service of the defence, the court will identify the issues and decide whether, amongst other things, to make an order for specific disclosure in respect of such issues, and will not permit a party to submit additional material save in exceptional circumstances.

However, it is clear that it is anticipated that proceedings in the IPEC will be split as between liability and quantum in the manner which is entirely conventional in intellectual property proceedings. Accordingly, there will be a first CMC in relation to liability and then a further CMC in the event that liability is established, in relation to financial relief (as occurred in the present case). Obviously, the CMC in relation to damages or an account of profits will necessarily allow for material to be introduced additional to that which was deployed at the liability trial. For example, there will be documents and evidence which have no relevance to the liability trial because they concern quantum only.

Therefore, CPR 63.23 must be applied separately in respect of both CMCs. It is a matter for the judge at the quantum CMC which issues should be included and which infringements should be considered. If it were correct that CPR 63.23(2) operated so that it was only possible to refer to further infringements in a damages inquiry if they had been listed at the first CMC in the liability trial, then the approach to abuse of process, which is a broad, merits based enquiry concerned with whether the defendant has suffered oppression, would be replaced with a test that res judicata applies to prevent consideration of further infringements in the absence of exceptional circumstances. That cannot be right for the reasons that Lord Millett gave in Johnson, as it would mean that the patentee would be denied the right of access to the courts conferred by the common law and guaranteed by article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms.

The fourth ground of appeal asserts that the judge found as a matter of law that knowledge of further infringements must come from information emanating from the defendant and, in the present case, it was AP Racing’s own investigations that gave rise, eventually, to its knowledge of the 7 Calipers. I do not read the judgment in that way. Indeed, the relevant passage at [17] of the judgment, which is a citation from the Aldi case, is concerned with knowledge of both parties and does not establish a rule that further evidence of infringement must come from the defendant alone. Therefore, I reject this ground of appeal.

The fifth ground of appeal is that the judge was wrong to find that it would take only an hour to deal with infringement of the 7 Calipers. From the information provided to me by both sides, it seems clear that this infringement issue will take considerably longer than this. The judge was led to consider the issue of timing by his view that he would not allow further infringements to be dealt with at a damages inquiry in the IPEC, unless they would require very limited further evidence. Therefore, he asked Counsel for their estimates of how long infringement by the 7 Calipers would take to be tried. Mr. Campbell estimated one day and Mr. Cuddigan estimated one hour. On the evidence before the judge, the one-hour estimate was perhaps more reasonable because at the trial of the action before His Honour Judge Birss (as he then was) no evidence was heard on infringement and the oral submissions lasted for about ten minutes. However, the matter has now moved on and I was told that there will be disputed technical evidence as to whether certain integers of the claims are satisfied by the 7 Calipers.

In my judgment, it does not matter to the issue of abuse of process whether the issue of infringement in respect of the 7 Calipers will require one hour or half a day of court time (the latter being the present estimate). In Generics (UK) Limited & Ors v. Warner LambertCompany LLC [2015] EWHC 3370 at [133], Arnold J did not consider that the length of a second trial (either one or two days) was an important factor when deciding whether to allow it to proceed. With great respect to Judge Hacon, I consider that he was led down this road by his mistaken view that he would not generally allow the Unilin practice to be adopted in the IPEC, and that therefore, the issue of infringement by the 7 Calipers could only be advanced if it would take a very short time to decide.

However, that does not mean that his judgment was wrong. His overall conclusion, in my judgment, was absolutely right. Indeed, there are further and more robust reasons to support it.

By its sixth ground of appeal, Alcon alleges that the judge was wrong to hold that there was no unjust oppression or harassment of Alcon in the 2015 Proceedings. For the reasons already given, I reject this ground. The general complaint is about the costs and inconvenience of the second action. Of course, all actions involve costs and inconvenience to the defendant. The question here is whether the second action is oppressive. It is not. The fact that the 7 Calipers are included in the 2015 Proceedings is as a result of Alcon’s objection to including them in the damages inquiry in the first action, and I agree with Judge Hacon that they could have been included in that inquiry.

Therefore, for all these reasons, I dismiss this appeal and allow the Respondent’s Notice.