Aerotel Ltd v Wavecrest Group Enterprises Ltd & Ors

This is the judgment in a patent infringement action with a counterclaim for the revocation of the patent in suit. The patent, which has expired, is №.2 171 877 (‘the Patent’) and is entitled “Telephone System”. When in force, it stood in the name of the claimant, Aerotel Ltd (‘Aerotel’) for whom Mr Henry Carr QC and Mr Andrew Lykiardopoulos appeared. Aerotel is an Israeli company whose main activity as far as I am aware, has been in licencing (and litigating) the Patent and its equivalents in other jurisdictions. Aerotel does not supply telephone systems or services. The Patent relates basically to a method of making pre-paid telephone calls which is available for use from any telephone – and to hardware for doing so. The method is described in conceptual rather than in detailed electrical or electronic terms and is illustrated by diagrams which show a network of ‘boxes’ which are linked, labelled and numbered. A particular group of such boxes is collectively referred to as a ‘special exchange’ (hereafter ‘Special Exchange’) and a good deal of the case turns on what this term means – and of course, what function it performs within the system which Aerotel claims.

The earliest (and unchallenged) priority date of the Patent is 13 January 1985. The evidence shows that 1984-85 were years when the first effects of radical structural change within the telephone industry (both here and in the USA) was being felt. It also coincides with a time when the effects of major technical change was being felt within in the industry. The appearance of the Patent was evidently well-timed to take advantage of both events.

This is not in fact the first time the Patent has been litigated in this jurisdiction. In Aerotel Ltd v Telco Holdings Ltd [2007] RPC 7 (Footnote: ²), the Court of Appeal was concerned with an appeal from an application for summary judgment to revoke the Patent on the ground that the invention was merely a method of doing business and was thus excluded from patentability under the Patents Act 1977 (‘PA ‘77’), s. 1(2) (Footnote: ³). At first instance (Footnote: ⁴), Lewison J held that the Patent claimed a method of doing business (Footnote: ⁵). He accordingly revoked the Patent. An appeal from his judgment was allowed, and the Patent was restored. The essential ratio of the decision of the Court of Appeal (Footnote: ⁶) was that the claimed invention amounted to a new combination or arrangement of hardware. The Court of Appeal were in fact comparing the ‘conventional’ way of making telephone calls (which went straight through

Mr Iain Purvis QC (who appeared with Ms Kathryn Pickard for the defendants) pointed out that the courts in the Telco case (unlike this court) had to accept any disputed facts in Aerotel’s favour. Moreover, they were not made aware of alternative ways of making a call which were part of the state of the art at the priority date and which also differed from the ‘conventional’ way of making a call referred to by the Court of Appeal. Had the Court of Appeal he submitted, been aware of the alternatives to ‘conventional’ calling at the priority date, it would not have reached the conclusion it did.

I shall of course be examining the PA ’77 s 1(2)/EPC Art 52 issue (which was referred to as ‘the Excluded Matter’ objection) later in this judgment, since the same ground of attack against the Patent has been raised in this case.

There are six defendants in the title to the action, all of them being part of the same group and all being referred to at trial as ‘WaveCrest’. The first and the fourth defendants are no longer parties. The second and the fifth defendants have agreed to be responsible for the acts complained of and the third and the sixth defendants have agreed to be bound by the outcome of the action and any subsequent appeal. It was also agreed that the issue of common design (Footnote: ⁸) would arise only if the second and fifth defendants were unable to satisfy any debt owed and thus the issue of common design was not addressed at trial.

WaveCrest supplies telephone services to the public through a number of systems all of which are alleged to infringe.

A number of attacks on the validity of the Patent have been made in addition to the excluded matter objection, mentioned above. I can in fact say that by far the greater part of the case concerned the counterclaim for revocation.

First, an attack on the basis of lack of novelty and/or obviousness was made in relation to the following citations of prior art

I should further elaborate on item 9(ii) above. The ATS III/65 system was alleged to have been used by National Applied Computer Technologies (NACT) of Utah and by its customers before the priority date. Prior to this action, Aerotel sued NACT in the US. By counterclaim, NACT produced the version of the users’ guide (Version 2.0) now in issue as a prior publication - and also alleged prior user of the system itself. In response, Aerotel alleged that the Version 2.0 of the users’ guide was a document which had been dishonestly doctored – a forgery in fact. It also cast serious doubt on the use of the Version 2.0 system before the priority date. Thereafter, NACT no longer supported the authenticity of Version 2.0 of its users’ guide - and the action settled before trial.

WaveCrest called no witness from NACT to establish the prior use or prior publication upon which they relied but instead relied on CEA notices. Forensic document analysts were however called by both sides to attest to the probable date of printing of the Version 2.0 users’ guide: a Mr Erich Speckin for Aerotel and a Dr Audrey Giles for WaveCrest. This issue in fact developed into a trial within a trial.

A further ground of objection was that of insufficiency. I shall go into this below but the main contention was that the Patent did not provide the skilled reader with an ‘enabling disclosure’ in that it failed to provide the technical information necessary to put its conceptual description into effect. However, by the end of the trial, it emerged that WaveCrest’s main purpose in pursuing this attack was to ‘squeeze’ Aerotel in relation to its response to the obviousness attack rather than to be a self-standing attack on validity.

Aerotel denied the allegations of invalidity and in relation to the excluded matter objection, asserted that in fact nothing had changed since the decision of the Court of Appeal - and of course, that I was bound by it.

As an antidote to the obviousness objection, by their amended defence to counterclaim, Aerotel relied on the commercial success of the invention subject of the Patent. They put forward two matters in support: details of the licencing of the Patent and its foreign equivalents (Footnote: ⁹) and the substantial revenues said to have been generated by WaveCrest (and by Telco, the earlier defendant) as a result of their allegedly infringing activities. To support this part of their case they called a Mr Mitchell Knisbacher who had been Aerotel’s Director of Licencing from 1994-2001.

For the purposes of both infringement and validity, following the experts, I have been concerned almost exclusively with two claims, claims 1 and 9, these claims being alternative expressions or facets of the same underlying invention. Claim 1 relates to ‘A method of making a telephone call from any available telephone’ whereas claim 9, a product claim in effect, is directed to ‘A telephone system for facilitating a telephone call from any available telephone station’. At the heart of both claims is the requirement of prepayment for the call, the availability of the proposal for use with ‘any’ telephone and the notion of the Special Exchange to do the needful.

An important point should be made at this juncture. Although the use of computer-driven switches is invoked for carrying out a number of important functions in the Special Exchange, the Patent does not concern itself with details of either the hardware or the software for use therewith.

I have mentioned that the issue of infringement was not the most contentious part of the case and that being so, I shall deal with it towards the end of this judgment. Since the case was said to differ from the Telco case in that validity in the light of the prior art was now in issue, I shall consider the excluded matter objection after considering the lack of novelty/obviousness attack-but before infringement.

As the result of enquiry by the Court, a further short hearing took place on 17 March 2008 which was attended by junior counsel only. This covered two topics. The first was the use of ‘regular’ credit cards (AMEX, Visa etc) to pay for telephone calls both before the priority date (Footnote: ¹⁰) and in the light of the teaching of the Patent relating to the use of credit cards. Following this, some general questions relating to the provision of goods and services against credit were also canvassed.

In order to understand what the Patent is about, I must first say something about the telephones and telephone systems which were in use at the priority date of the Patent. Then I shall briefly describe how telephone calls were billed and paid for at the time. Though it is a topic to which I shall return later, all these matters formed part of the common general knowledge of the field in question, that is, the general field of telephone business and telecommunications technology. Many of these topics were uncontroversial though the parties understandably tended to concentrate more on different aspects of the subject. I shall identify the skilled addressee and consider further the common general knowledge after going into the Patent in the next major section.

One threshold matter became evident from the start of the trial: that though there were differences between the US/Canadian telephone markets and that in the UK at the priority date, workers in these countries were generally aware of what was afoot elsewhere. To take a well-known example of a difference, in the US/Canada, local calls are free whereas they are not in this country – a fact which incidentally forms the basis of one of the insufficiency objections. That said, the Patent was evidently written with the US/Canadian telephone market in mind (Footnote: ¹¹).

On the commercial side, by the priority date, important changes in the industry were underway - both here and in the USA. In the US, the near monopoly enjoyed by AT&T had been broken up in 1984 into a number of smaller entities such as Sprint and MCI. By 1984 in the UK, the process of denationalising the monolithic BT and of deregulating and liberating the telecommunications industry as a whole, was beginning (Footnote: ¹²). Nonetheless at the period of interest in this case, the evidence was that BT was still the giant it had always been as regards both business and technology. For example, its monopoly on telephone services had been broken at that time only by Mercury – and then, only in London. In this country therefore, workers in the industry (Footnote: ¹³) would, I think, still look first to see what BT were doing for enlightenment.

By the priority date, thinking within the industry was therefore undergoing an unprecedented overhaul; after a time of relative inactivity, commercial and technical innovation were in focus as never before. There was awareness of such change both within and without the industry and some at least of its practical implications must I think, have been present in the mind of the notional skilled addressee by the beginning of 1985 (Footnote: ¹⁴). Nonetheless, in this industry, trying today to put oneself back to that time, is not at all easy; so much has happened in the last 20 years in the telephone industry. As Mr Carr pointed out, the court’s approach must have about it neither detached nor worse, engaged prejudice regarding the teaching of the Patent. Relevant issues in 1985 cannot be judged in the era of the ubiquitous mobile telephone and the galaxy of services offered by the MNOs (Footnote: ¹⁵), without constant caution. Fortunately, the quality of the expert evidence in this case was high and the court was thereby much assisted in maintaining a proper perspective.

At the priority date, telephone systems comprised telephones each separately connected to a local exchange. The local exchanges were connected to each other via intermediate ‘transit’ or ‘tandem’ switches and long distance lines, called in the UK (and some other countries), ‘trunks’ . Nearby local exchanges could also be connected directly, so that local calls could be connected without using trunk lines. There were thus a number of basic elements in a telephone system (‘the architecture’): the telephones themselves, the local exchanges, transit switches, the group switching centre, trunk lines and local lines and the international exchanges.

Telephones. Which telephones were in use at the priority date was a topic of importance to the validity case, both to that of obviousness and insufficiency.

At the priority date, local Strowger exchanges (see below) were being replaced by automatic electronic exchanges. Transmission means were also changing. Subscriber’s telephones were at the time largely connected to the local exchange (and they in turn, to group switching centres (GSCs- see below)) by means of copper wires. By the mid-1980s however, the copper wires were being replaced with coaxial cable, optic fibre, microwave links and possibly other low-loss transmission means.

The telephones themselves were also changing. Telephones were principally of two types: the older pulse-dial (or loop disconnect) telephones (Footnote: ¹⁶) and the modern DTMF (Footnote: ¹⁷) (or push button) telephones which used tone dialling (Footnote: ¹⁸). An advantage of the latter was that they were readily compatible with the new generation of automatic, electronic and computer assisted telephone operations which were being introduced at that time to replace operator serviced systems. It seems that tone dialling was developed many years before the priority date in fact, but took time to become widely used.

Whilst DTMF telephones were gradually being installed in the UK, they were still greatly outnumbered by the pulse dialling machines. In fact, by 1985 rather few telephones in this country (Footnote: ¹⁹) actually had DTMF capability but the policy was (as was well known) that their numbers should rapidly increase and that in due course, pulse-dial telephones should disappear entirely.

Auxiliary tone-generating devices (Tone diallers). These were hand-held tone generating devices which were readily available (though they were rather expensive) both in the US and in this country (Footnote: ²⁰). These devices enabled a pulse-dial telephone temporarily to become available for tone dialling (Footnote: ²¹). The device was applied to the telephone microphone and the numbers manually entered on the keyboard of the device. I was shown a sample of a pocket tone dialler at trial and understand that at the priority date, they cost about £ 45 to buy.

The Local Exchange. At the priority date there were four principal types of local exchange:

Transit switches and the Group Switching Centre (GSC). These interconnected with all the local exchanges in a local call area. Connections between GSC’s are the ‘trunk’ lines. The GSC had the inbuilt capacity to ‘route’ calls nationally so as to make use of the most efficient route - or in case of line fault, to find an alternative route. The GSCs also routed international calls via the international exchange.

Prompts. Prompts to the caller came from the local exchange. These were heard by say, a change of dial tone or by the use of viva voce or prerecorded announcements. Prompts of various kinds were in common use at the priority date.

PBXs The use of private branch exchanges (PBXs) was widespread at the priority date. On one side of the PBX was the local exchange and on the other, a private network of lines (usually within a building) which could be called up on any telephone via the local exchange. The PBX was in fact described by Mr Chandler, Aerotel’s general expert witness, as an ‘onpremises telephone switching system’ some PBX’s ‘being identical with local exchanges’ (Footnote: ²³). The set up is shown diagrammatically in Appendix 5 to WaveCrest’s opening skeleton argument (Footnote: ²⁴). In addition, Mr Chandler’s evidence was that stored–program-controlled PBXs had been available since the 1970s (Footnote: ²⁵).

Not surprisingly, there was a good deal of evidence on this topic. Risking a glimpse of the obvious, the gist of it was basically this: telephone billing rests on credit. Save in exceptional circumstances (Footnote: ²⁶), neither the caller nor the service provider will know how much a call which is about to be made, will actually cost. The main variables are duration, distance and the time of day. By giving credit to the caller, the telephone company took a degree of risk in being sure of being paid. At one end were those customers who were deemed to be creditworthy before they made the calland at the other were those who hadactually paid for future calls before they made them. The first method of payment is called post-payment whereas the latter is called prepayment. This case is concerned mainly with the latter.

Indeed there were (and still are) only these two ways of paying for a telephone call, both being well established at the priority date. The first and most commonly used method was for the telephone company to rely on its customer’s financial standing (or that of say, a credit card provider) and to charge by some form of post-payment billing. Alternatively, a caller’s means could instantly be drawn upon by some form of pre-payment. Within these two basic ways of paying for telephone calls, the evidence showed that there were numerous permutations as to how calls are actually made and paid for, the means being augmented by advancing technology and business conditions. Looking ahead, Mr Purvis frequently characterised the basic proposal of the Patent (viz using a pre-payment system from any telephone) as being merely another of these permutations.

I shall next look at these two methods of payment in rather more detail. Unhelpfully, these services have been given similar marketing names

At the priority date, this took a number of forms.

The periodic statement The most common method of payment for the use of home and office telephones was (and still is) by some form of historical billing which is sent to the customer on a monthly or quarterly basis after the calls are made. At the priority date, local calls in the UK were computed on the number of units and the time of making the call. Long-distance calls were billed on the basis of the duration, time of day and the distance involved. In both cases, recording of usage was normally undertaken at the local exchange mainly through the Strowger switches – though increasingly, by use of electronic charging means. Sometimes a deposit was required of the subscriber at the time of ‘signing on’.

That is the simplest case. There were however, post-payment means which could be used away from home (or the office) - and on any working telephone. These had a number of the practical benefits to the caller which, looking ahead, are extolled in the preamble to the Patent as being benefits derived from its use. The following cases illustrate such usage, their availability (as I understand it) roughly keeping pace with an advancing technology.

The BT Telephone Credit Card (Footnote: ²⁷) is a good example of such post-payment

A variant on BT’s Credit Card was BT’s CreditCall which I have mentioned. This was being trialled some months before the priority date at Heathrow Airport and at Waterloo Station. BT CreditCall made use of an ‘ordinary’ credit card (such as AMEX, Visa etc) which the caller ran through a swipe reader in a payphone. The personal details of the caller and the validity of the card were checked electronically. If the card was valid, the caller was able (on prompt) to dial the party with whom he wished to speak. The user of this service was billed for the call via his credit card account. Aerotel wished it to be made clear however that this service was neither pleaded nor was it said to form part of the common general knowledge of the art. Unchallenged evidence about its availibility was however given from a BT witness (see below), a Mr Murrey.

By the priority date, the evidence was that the installation of appropriately programmed computers to replace operator-provided services generally, seems to have been well underway in the UK as well as in the US.

There was also of course, the cashless reverse charge call, well known I suspect, to most parents at all relevant times. It was likewise available from any telephone and entailed a small extra fee. This was a post-payment system which also established a pre-call credit and which, when used, was actually paid for later in the usual way.

The classic pre-payment method of paying for telephone calls was via the coin (orjeton) operated telephones which had been universally in use for years before the priority date. These telephones, which were specially adapted for the purpose, were to be found not only in public places but were also rented within private property - pubs, flats, schools etc.

Then, in 1981, BT introduced a variant on traditional pre-payment: the BT

In either case, when the cash or prepaid call units on the Phonecard were used up, the monitoring means caused the call to be terminated automatically (Footnote: ²⁹). As one would expect from a prepay system, there is no forward credit beyond what has already been paid for. Mr Carr stressed that the BT Phonecard could only be used in a payphone.

Whatever pre-payment method was used, the system had to have inbuilt means initially to recognise available credit (or lack of it), to monitor its balance whilst the call was in progress and to terminate the call once the credit had expired. At the priority date this could be done either through the operator or automatically.

In my judgment, save for the BT CreditCall, all this was part of the common general knowledge at the priority date. I shall return to the topic of common general knowledge below.

At the priority date of the Patent, the two methods of paying for calls which I have described were regarded by those in the telecommunications industry as no more than alternative ways of payment. In both cases, immediately before the call, credit in one form or another was made available by the telephone company to the caller; in the first case this was in the form of an understanding that its bill would in due course be paid by the caller (or by a credit card company) whereas in the latter, the caller had actually paid for an amount of call time but not yet used it. In the first case the telephone user benefited from temporary credit, whereas in the latter, the credit for calls was ‘up front’. The only difference I can see between the two is commercial: that security for the payment of future calls is a matter of degree to be chosen by the telephone company for particular transactions.

Looking ahead, in the light of the foregoing, the manner by which a telephone company is paid by its customers for the calls they make, is undoubtedly part of its way of doing business. Whichever method of payment is chosen, it is in my view, ‘a method of doing business’.

Though the Patent is entitled ‘Telephone System’, the title is a misnomer; it does not propose a telephone system. Rather, the invention is intended to be put into effect within an existing telephone system. The Patent has been drafted in essentially conceptual, nontechnical language, its diagrams for example, being an assembly of interconnected and numbered boxes (called ‘blocks’). The use of computers is proposed but these are described without qualification - other than by the function they are to perform (Footnote: ³¹). The same goes for the other items of telecommunications equipment which are described, there being no description of the actual hardware necessary to implement the invention.. Such items were all (one assumes) in use in the telecommunications industry at the priority date – save, it is said, for one item which the language of the claims treats as a composite unit: this is the Special Exchange. When opened up however, the Special Exchange itself comprises a number of interactive ‘blocks’ having processing functions. The functions of these will fall to be examined later – but again, neither hardware nor software is elaborated upon.

The proposal of the Patent may be divided into two parts:

It has become common in patent cases to refer for various purposes to a patent or claim being drafted at ‘particular level of generality’. In this case, I would characterise the level of generality in which the Patent has been cast as that of the general business or strategic level. This is not therefore a typically technical document in the sense that the word ‘technical’ is normally used in patent cases, nor is it what Mr Purvis characterised as a mere ‘wish list’. It has been drafted at a fairly high level of generality and this is a fact which I have had to bear in mind in what follows.

Having read the Patent a number of times, I am of the view that Mr Richard Chandler, Aerotel’s expert, is right when he says (Footnote: ³²):

“In my opinion the inventive concept claimed in the Patent is a system and method for making prepaid telephone calls conveniently and inexpensively from any available telephone…The system includes a special exchange which sits behind the local exchange and thus obviates the installation of specialised telephones or equipment on each telephone line.”

Furthermore, the gist of the Patent is, I think, also epitomised in its penultimate paragraph (p16):

“Accordingly, a method of using any telephone for prepaid telephone calls is provided. A system is thus provided that benefits travellers and others having a need for the availability of telephone service from any telephone.”

The first two and a half pages of the Patent recount a number of ‘significant detriments’ allegedly facing telephone users in paying for calls in 1985, this (so it is said) giving rise to a long-felt want for better. However, in the light of what has been discussed in the preceding section, like Lewison J (Footnote: ³³), I am inclined to read this catalogue of difficulty and inconvenience with a pinch of salt in the light of what was already on offer to callers at the time. The narrative states on p 1:

“Further, toll or long distance telephone calls are used more and moreas people travel more and conduct business on a less localized basis. Presently long distance calls can be made by charging the call to a local telephone such as for example to a telephone in a hotel room. The long distance call can be made by instant payment such as for example when using a public payphone. The long distance call can be made by charging the call to the calling party's home or business telephone or by using a telephone company credit card number. The long distance call can also be made as a 'collect call' where the called party has to accept the call and is then billed the time and charges for the call.

Each of these present day methods for making and paying for toll calls has significant detriments. For example when a call is charged to hotel room telephones the hotel adds its charges to the call thereby disproportionately increasing the cost of the call.

It is extremely difficult to make long distance calls from public payphones since it requires large amounts of the coins – not ordinarily carried about – especially when touring or on a business trip.

The use of credit card calls often results in mistaken charges billed to the telephone credit card number. Further, to obtain a telephone credit requires credit checks and the establishment of credit, often almost impossible to acquire.

Salesmen similarly should be able to call their home offices from a customer's telephone without having the call charged to the customer's telephone which is inconvenient or to their home office phone with the previously mentioned difficulties and the added cost.

Thus there is a long felt need for a system which enables making telephone calls including local or toll calls conveniently, inexpensively and from any telephone. Thus, if a party wants to make a call, be it a local call or a long distance national or international call, he should be able to accomplish the call from the nearest available telephone.”

The patent identifies a number of known means by which a telephone call can be made without being charged to the number being used by the caller. It can, says the patent, be made by charging the call to the calling party's home number or the calling party's business telephone or by using a regular credit card. In addition, the patent refers to making a “collect call”. The Patent, therefore acknowledges that there are at least four methods by which a telephone call can be made without charging the call to the telephone number from which the caller is actually calling.

The Patent goes on to describe (p 3) the method which it proposes to solve the problems identified in para 55 above (Footnote: ³⁴).

“According to a broad aspect of the invention, a telephone system for facilitating a telephone call from any available telephone station, comprising: means for coupling a calling party station to a special exchange; memory means in the special exchange for storing customer special codes and prepayment information individual to each customer; means for verifying the calling party responsive to a code transmitted from the calling party station to the special exchange so as to verify that the code matches the special customer code in the memory means and the calling party has unused credit; and means for connecting said calling party station to a called station responsive to the verification.”

The Patent then describes an option³⁵:

“Means may be provided in the special central station for further increasing the cost effectiveness of the system by selectively routing the call over the least expensive available lines.”

When it comes to describe the system (and after identifying its four schematic diagrams), the Patent reads as follows (p6):

“The customer, such as a regular telephone user or a traveler, acquires a special code, a credit amount and the telephone number of the special central offices by either a cash or credit card payment. The code, the credit amount and telephone numbers may be acquired, for example through the regular credit card companies and charged to the acquirer's credit card. Alternatively, the credit amount, the telephone numbers and identifying code can be purchased at sales points such as in airports, hotels, rent-a-car stations and the like. The amount paid is credited to the acquirer for use against future telephone calls. The credited amount is stored in a memory at the special central office along with the special code.”

The narrative continues (p7) by reference to the flow chart given in Fig 1 (Footnote: ³⁵):

“Subsequently thereto, the acquiring party wishes to make a telephone call which may be a local call or a toll call. He uses the nearest available telephone, removes the handset and dials a special central office as indicated at blocks 13 and 14. The telephone in this example is a private station. When he is connected to the special central office (traveler phone serves office) (Footnote: ³⁶)[f]or example 14,. a special dial tone is sent from the special exchange to a calling station. When the calling party hears the special dial tone indicating that the computer at the exchange is ready for him he dials the identifying code and the called number he wants as indicated at block 17. The computer at the special exchange checks the code and registers the desired called number.

If the code number is a genuine code with credit ie valid as indicated at block 18 and 19, a regular dial tone is sent to the calling party station as he is connected to the regular telephone system. The computer at the special exchange routes the call on the most economical available lines, according to prior arrangements with long distance line suppliers, if it is a toll call.

The calling party’s pre-dialed numbers are transmitted as indicated at block 21. Of course the system can be arranged so that the calling party dials the called party responsive to receipt of regular dial tone.”

The call is monitored by equipment at the local exchange recording the amount of time spent on the telephone (p9):

“ At this time as indicated by block 28, the normal time and distance computer circuit, shown as a peg counter, is put into service to provide information for timing the call against the available credit. The information form the peg counter is sent to a comparator 29 to continuously determine whether the calling party’s credit is sufficient to pay for the call. When the credit equals the used time rate the call is automatically ended by the computer as indicated by the block 31.

Block 31 opens the connection between the calling and the called party, the connection to the computer however remains and an announcement is made to notify the customer to insert another code number.”

The use of announcements, oral or visual, to prompt the user is described (p 13 and blocks marked ‘RA’ (Footnote: ³⁷)).

Fig 3 is ‘a block diagram’ describing the basic operation of the claimed system. It is reproduced below and is described thus (p 13):

“The calling phone is indicated at 81. The telephone 81 is connected to a regular telephone system indicated at 82. The calling party dials the special charge number and by a code number verifier 83. The code number verifier looks into a section of the memory as indicated by the code, to verify that the code is valid. When a valid code is confirmed, the credit for that code is checked in the memory to determine how much credit is left. The credit verification is shown at 84 and the memory at 86. The announcing system for the purposes indicated in the flow diagram is shown at 87.

When the number and credit are verified the calling party is then connected through a register indicated at 88, to a re-dialer 89. The register stores the called number received from the calling party and directs the re-dialer to dial the number. After verification, the dialed number or dial tones are directed through the router 91 to the regular telephone system. The router selects the best possible route cost-wise for the particular call if the call is a toll call.”

Claim 1 was broken down by counsel at trial as follows

Claim 2 reads:

“A method as claimed in claim 1 wherein the connecting step includes special routing”

Claim 9, a product claim, is for a telephone ‘system’. It is important to note however that this is actually a claim “to a physical device consisting of various components” (Footnote: ³⁸). Both in the Court of Appeal (in the Telco case) and at trial, claim 9 was unusually considered before claim 1, perhaps because it is more succinct. Moreover it differs in certain respects from the method claim of claim 1. It was broken down by counsel as follows:

the calling party has unused credit, and

‘Monitoring the remaining prepayment’ Mr Chandler called this integer ‘a fundamental feature of the patent’. He was taken up on this and the crossexamination which followed shows I think, an initial misunderstanding on his part of the function of the integer:T2/285-287. The issue is ‘monitoring the remaining prepayment’ and not monitoring the call itself – which would be a much more complicated task as I understand it. Call monitoring is not claimed. Moreover (in view of a subsequent debate about items known as auxiliary processors), the Patent is not at all concerned about how this is to be carried out.

The point is simple: that the telephone company must be paid and will give no credit when the recorded ‘kitty’ runs out. Though Mr Lykiardopoulos seemed hesitant to agree with me on the point, what is in issue is precisely the same event which occurs in the two instances of prepayment for calls which were part of the common general knowledge (see above), though effected no doubt, in a more up-to-date manner.

The Windsurfing enquiry as modified Before examining the pleaded citations under this head, there are a few preliminary matters of a general kind which I should attend to. These have application to all the citations and may conveniently be considered at this point.

Pre-payment, said Mr Carr, (echoing no doubt, Mr Chandler’s view of the inventive step) was what made the invention of the Patent so very different from what had been done before. By use of computer memory to control switches to exploit this new perception, Aerotel had made a significant and patentable advance in the provision of telephone services to the public. Mr Purvis accepted that all the citations were indeed directed to post-payment proposals. There were he said, commercial reasons for this. But having opted for pre-payment, the other features of the claim inevitably followed - and by the use moreover, of a combination of well known hardware.

To put flesh on their commercial success argument, Aerotel called a Mr

I have approached this issue on the usual basis viz that commercial successis the complement of a long felt want, the latter having been identified in the preamble to the Patent.

Facts The case on commercial success which is pleaded relates to licencing agreements which Aerotel entered into with a number of companies and the income arising therefrom. All but the Telco agreement is in respect of the settlement of litigation under the US equivalent of the Patent. The existence of such licences is not in doubt but Mr Purvis submitted that their existence alone is no evidence whatever of commercial success. He noted first that Aerotel are apparently simply a licencing vehicle; they provide no telephone services. He further noted that two of the licences were entered into with bankrupt companies and apart from the Telco settlement, none of them related to the Patent. Moreover, in answer to ‘long felt want’, he pointed to the fact that none of the settlements related to activities occurring in the first 10 years or so of the life of the Patent.

Mr Knisbacher did his best to assist the court but because he had left the company before all but the NACT settlement occurred (Footnote: ⁶⁷), he was unable to give much direct help as to what compelled the various parties to become Aerotel’s licencee. Moreover, there was no evidence about the so-called ‘detriments’ mentioned in the preamble to the Patent which was said to lead to solution which it provided.

Law I have long considered that the statement of law on this subject by Lord Herschell in Longbottom v Shaw (1891) 8 RPC 333 at 336 -337 (HL – but not cited), can hardly be bettered. I shall therefore apply it to this case.

On this topic, I have also borne in mind what Laddie J said in Brugger v Medic-Aid [1996] RPC 635 at 655:

“ On the basis of this they say there is no reason why it should have been obvious to modify the prior art in any particular direction. That it appears to me, is a non sequitur. The fact, if it be one, that existing commercial products are highly successful and satisfactory does not indicate that there are no obvious modifications to make to them. It merely demonstrates that there may be little incentive to those already making those products to change the design – a quite different matter.”.

I would add that no explanation for these discrepancies can be found in the NACT documents. What is clear and to my mind seems most important, is that neither expert believed that these two documents was printed before January 1985, the priority date. Therefore Version 2.0 cannot have been distributed before then. Moreover, as an added matter, there were missing pages from Version 2.0 as well.

Mr Andrew Murrey is Head of Products at BT Payphones having worked

Mr John Empringham has now retired but was employed by BT from

In such cases, what is relevant when the issue is obviousness is first to hear what the experts say about how a particular citation would be understood by the skilled reader at the priority date and then proceed in the manner of Windsurfing. Neither Mr Murrey nor Mr Empringham were involved in the thinking within BT behind this proposal. But evidence was given about it by the general experts and in cross-examination on this question, there were some differences between them.

Going back then to the fourth step of the Windsurfing enquiry, I am of the view that there is no degree of invention required whatever in relation either to an initial decision to arrange for pre-payment rather than post- payment for the telephone calls made by AccountCall or to the implementation of such a decision. The Patent is therefore in my judgment also invalid on the ground of obviousness in the light of the use of BT AccountCall.

Step (c) The step two ‘contribution’ consists in my judgment, entirely of excluded matter. First, the election to solicit pre-pay clientele is unarguably a ‘business method’ (see above §§49-50 above). The consequence in ‘computer terms’ forms no part of the invention; it is done with appropriate software. Moreover, even if it did form part of the invention, it would therefore only involve the construction of appropriate computer programs and would also be excluded from patentability.