Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
THE HONOURABLE MR JUSTICE KITCHIN
ON APPEAL FROM THE PATENT OFFICE
IN THE MATTER OF THE PATENTS ACT 1977
and
IN THE MATTER OF an application for restoration of patent GB 2 342 726
in the name of BENDING LIGHT LIMITED
Mr David Willetts for Bending Light Limited (the appellant)
Michael Edenborough (instructed by The Treasury Solicitor) for the Comptroller General of Patents (the respondent)
Hearing date: 15 January 2009
JUDGMENT
MrJustice Kitchin :
Introduction
This is an appeal by Bending Light Limited (“Bending Light”) against the decision of Mr G.J. Rose’Meyer, the Hearing Officer acting for the Comptroller, dated 30 January 2008. By his decision, the Hearing Officer rejected Bending Light’s application to restore patent GB 2 342 726 (“the Patent”) following a failure to pay a renewal fee.
The renewal fee in respect of the seventh year of the Patent fell due on 15 September 2004. It was not, however, paid by that date. Nor was it paid during the six months grace period which followed as prescribed by section 25(4) of the Patents Act 1977 (“the Act”). The Patent therefore lapsed on 15 March 2005.
An application for restoration was filed on 13 April 2006, within the 19 months prescribed by rule 41(1)(a) of the Patents Rules 1995. Over the ensuing months, the application was supported by three statutory declarations and two witness statements of Mr David Willetts, the Executive Chairman of Bending Light. Nevertheless, the UK Intellectual Property Office (“UKIPO”) formed the preliminary view that the requirements for restoration, as laid down in section 28(3) of the Act, had not been met because Bending Light had not taken reasonable care to ensure timely payment of the necessary fees, including the prescribed additional fee which must be paid when a renewal fee is paid during the six months grace period. Bending Light did not accept this preliminary view and requested a hearing.
The hearing duly took place on 30 November 2007, at which Bending Light was represented by Mr Steven Gee of the patent attorneys D.W & S.W. Gee. Mr Willetts also attended. Despite the submissions of Mr Gee and representations from Mr Willetts, the Hearing Officer affirmed UKIPO’s preliminary view and issued his decision accordingly. It is against that finding that Bending Light now appeals. On the appeal, Bending Light has been represented by Mr Willetts.
Background
Bending Light was formed in September 2001 to exploit the inventions of a Mr Peter Milner and over the years it has acquired a significant international patent portfolio. Unfortunately, Mr Milner died on 24 December 2003. At that time, Mr Milner and a colleague were the controlling shareholders in Bending Light and its only two executive officers. Mr Milner’s death left the company with only one full time executive who was unwilling to continue work because the company lacked funds from which to pay him a salary. The other shareholders in the company were private investors and not otherwise connected with Mr Milner or his colleague.
Following Mr Milner’s death, Mr Willetts was asked by the non-executive directors of Bending Light to assume responsibility for the affairs of the company on a part-time basis. It soon became apparent Bending Light was in a parlous financial state with no effective controls over expenditure, although pressures were eased, at least temporarily, by an injection of funds from the minority shareholders.
Mr Willetts also began to look at the patent position. At that time Bending Light was represented by the attorneys K.R. Bryer & Co. There is no doubt on the evidence that those attorneys had in place an effective system for dealing with renewals and that Bending Light was at all material times aware of the deadlines for the payment of renewal fees in respect of the Patent. Nevertheless, the relationship between Mr Willetts and his attorneys was not a good one. He formed the view the portfolio needed rationalisation and that considerable costs had been incurred on inventions of marginal commercial value. He therefore decided the time had come to transfer the portfolio to a new firm of attorneys and, on a recommendation, he chose Mr Steven Gee of D.W. & S.W Gee to conduct a thorough review. Despite that decision, the transfer was not immediate. Some issues with K.R. Bryer & Co remained outstanding and so Mr Willetts maintained an ongoing working relationship with that firm until early 2005 to try and resolve them.
In the meantime, Bending Light received a timely reminder that the renewal fee in respect of the Patent was due on 15 September 2004. However, Mr Willetts did not wish to incur further expense with K.R. Bryer & Co and so he decided to delay payment into the six month additional fee period, during which time he expected to instruct Mr Gee to take over responsibility for the patent portfolio and to pay all outstanding fees to secure the renewal.
In early 2005, the financial position of Bending Light again became critical and, as a result, Mr Gee was not commissioned to undertake the planned review, nor to take over responsibility for the portfolio. In February 2005, Mr Willetts terminated the relationship with K.R. Bryer & Co and from that point Bending Light relied on reminders received from the Patent Office and from overseas attorneys, to maintain the portfolio. Mr Gee was instructed on a case by case basis to pay the requisite fees and take particular actions, as matters arose.
Mr Willetts was aware that the final deadline for the payment of the renewal fee and all additional fees in the respect of the Patent was 15 March 2005, having received reminders of this from K.R. Bryer & Co prior to the termination of their representation. Those fees amounted to a total of £210. However, Mr Willetts maintains that, unfortunately, there were insufficient funds in the business to pay all the costs incurred in 2005 and, in particular, all costs which fell due in March 2005 and, whilst he wished to maintain the patent portfolio in place, funds were not available to pay the renewal fees then due in respect of the Patent.
Strenuous efforts were made throughout 2005 to raise additional funding. Eventually it was secured in December 2005, more than 12 months after the process had commenced. Thereafter, Mr Willets instructed Mr Gee to take over responsibility for the portfolio and to undertake the required review. This confirmed the lapse of the Patent in September 2004. On 28 March 2006, Mr Gee was instructed to undertake the necessary action to secure its restoration and this application was duly issued.
The law
The Patent ceased to have effect before 1 January 2005 and hence the relevant provision is section 28(3) of the Act, as it then stood:
“If the comptroller is satisfied that-
(a) the proprietor of the patent took reasonable care to see that any renewal fee was paid within the prescribed period or that the fee and any prescribed additional fee were paid within the six months immediately following the end of that period,
the comptroller shall by order restore the patent on payment of any unpaid renewal fee and any prescribed additional fee.”
It is to be noted that if the Comptroller is satisfied the proprietor took reasonable care to see that the appropriate renewal fee and any additional fees were paid then restoration is mandatory. The key question is what is meant by the phrase “reasonable care to see” that any fees were paid in the appropriate period and, in particular, whether it is relevant that the proprietor is impecunious.
In Continental Manufacturing & Sales Inc.’s Patent [1994] RPC 535, Aldous J. thought the words of the section needed little elucidation. As he said, at 542:
“Counsel for Continental referred me to the House of Lords decision in Textron Inc.’s Patent, [1989] R.P.C. 441 and counsel for the Comptroller referred me to Tekdata Ltd.’s Application, [1985] R.P.C. 201. Both sought to draw analogies from what was said in those cases. I do not believe that such an approach is helpful. A system or set of circumstances which amounts to reasonable care in one case may, upon slightly different facts, not be reasonable. The words “reasonable care” do not need explanation. The standard is that required of the particular patentee acting reasonably in ensuring that the fee is paid.”
In Ament’s Application [1994] RPC 647, decided that same year, the issue of impecuniosity arose more directly. The applicant for restoration, Mr Ament, claimed the renewal fee had not been paid because he was prohibited by the United States Bankruptcy Code from applying his funds in this way. The Hearing Officer rejected the application, holding that an impecunious proprietor could never say he had taken reasonable care to see that any renewal fee was paid. On appeal Aldous J disagreed. He considered the fact that a proprietor could not pay is a factor the court must take into account but is not conclusive. As he said at 657:
“It is not a requirement of that section that a patentee must at all times keep himself in a financial position to pay. It is sufficient that he takes reasonable care to see the fee is paid. That may require seeking financial assistance and in appropriate cases taking reasonable care to avoid impecuniosity.
I have come to the conclusion that a patentee who merely establishes inability to pay does not establish that he has taken reasonable care to see that the fee is paid. To establish that, he must go further and show that he wanted to pay and that he had taken reasonable care to ensure that he was in a position to pay. I therefore turn to the evidence to see whether Mr. Ament has discharged the onus upon him.”
After reviewing the evidence as to how Mr Ament found himself in this unfortunate position, Aldous J. concluded at 659:
“A party who intends to pay a renewal fee but cannot do so, must establish that he has taken reasonable care to pay. That requires him to establish that his inability to pay has not resulted from any lack of reasonable care. Where the circumstances surrounding the impecuniosity of the patentee are complicated, as in this case, it will be a heavy onus to discharge. I do not believe it has been discharged in this case. The evidence sets out the difficulties of why Mr Ament could not pay. It does not establish that those difficulties did not arise from, in part, his failure to take reasonable care. It follows that the appeal must be dismissed.”
Mr Ament’s case was in some respects a particularly hard one. He was prohibited by United States law from paying the fee. But this was not enough. He had to go further and show his impecuniosity was not attributable to any lack of care and, the facts being complicated, he had a heavy onus to discharge.
In my judgment I should apply a similar approach in respect of the claim to impecuniosity in this case. The renewal fee and the additional fee together do not amount to a large sum. I think it necessary to consider with close attention whether the applicant truly had no funds with which to pay them. In so far as the facts are complicated then the burden lies on the applicant to elucidate them.
The decision of the Hearing Officer
The Hearing Officer considered the evidence before him to ascertain the financial position of Bending Light during the relevant period and so allow him to determine whether the company took reasonable care to ensure the necessary fees were paid. As he said at paragraphs [33] to [35] of his decision:
“33. The evidence clearly shows that certainly during periods within the 9 month window in which the patent could have been renewed, significant sums of money were secured by various means and potentially at least were available to pay the renewal fees (with penalties as appropriate) if Mr. Willetts chose to do so.
34. During examination of this application, the office made enquiries about the cash budget of £49,000 available to the proprietor as at the end of February 2005 according to the evidence. Mr. Willetts detailed in evidence how these funds were to be fully allocated toward the payment of various commercial and contractual debts. His witness statement of 18 April 2007 shows that the amount owed to creditors at that time totalled some £35,043 and that some of these creditors were paid in March 2005.
35. That evidence also showed a contractual commitment totalling £15,000 with a particular firm, but the evidence also shows that the invoice for that sum was not received until June 2005, outside the last date of 15th March 2005 on which the late renewal could have been paid.”
Having done so, he was simply not satisfied that Bending Light did not have the necessary funds to pay the fees, as is apparent from paragraphs [38] to [45] of his decision:
“38. The proprietor argues that difficult, invidious decisions had to be made on a daily basis, including legal obligations regarding the solvency of the company. One of these obligations as Mr. Willetts explained it to me at the hearing is to show that you can meet your liabilities as they fall due. So his financial strategy was to a great degree informed by this. He paid, or endeavoured to pay, as many of the company’s liabilities as he could as and when they fell due. The evidence certainly supports this.
39. However, during the relevant period, on the 15th March 2005 the final renewal fees also became due. Unfortunately for Mr Willets, he took the decision not to follow this practice with regard to the patent renewal fees.
40. At the hearing Mr. Gee sought to draw distinctions between his view of how previous case law referred to by the office differed from the office interpretation of it. That case was Convex Ltd’s Patent [1980] RPC 423. Mr Gee said the office supported its preliminary view to refuse the application to restore the patent in suit by inferring the judges’ views in that case meant that patent fees are somehow more important than everyday bills.
41. He argued that the circumstances in this present case and in that were not on all fours at all and that certainly it was not to be inferred from that case that payment of patent renewal fees are more important that payment of commercial debt.
42. I accept that submission in so far as it goes, but I do believe one of the principles to come out of Convex is that patents must be given a high priority in business considerations.
43. Through all the difficulties faced by the proprietor in this case, many debts and obligations were met. The proprietor did a remarkable job in many ways. However, the ultimate thrust of the proprietor’s argument is that the failure to pay the renewal fees was caused by a lack of funds, not by prioritising the payment of those fees below others.
44. I simply cannot find this from the evidence before me. It is clear funding was available during the relevant period, notably in the early part of 2005 and up to and including the final deadline date of 15th March 2005.”
45. Other debts were paid. The patent fees were not. With good commercial reason no doubt, but at the point when Mr. Willetts was aware the final date was upon him (and there is never any suggestion that he was not aware of that date), to choose not to pay the fee, knowing full well the consequences of his decision, cannot in my consideration be regarded as reasonable care within the meaning of the Act.
In conclusion, the Hearing Officer found Mr Willetts took a conscious decision to delay payment until the end of the 6 month grace period. He was aware of the 15 March 2005 deadline, but when funds were available he chose to use them for other purposes. The Hearing Officer therefore refused the application.
The appeal
On the appeal, Mr Willetts argued the Hearing Officer fell into error in that he failed to give adequate consideration to the evidence as a whole that throughout 2004 and 2005 Mr Willetts was trying his utmost to rescue Bending Light. At the outset he found the company in a dire financial position and in a state of disorganisation. In June 2004 the company secured a rescue round of capital but, despite the strenuous efforts of Mr Willetts over the ensuing 15 months, further funding was not obtained until December 2005. In the meantime Mr Willetts had to make difficult decisions as to how the business should be run. That was something he was well equipped to do because he was a qualified accountant and fully conscious of the obligations owed by the company and its officers. He maintained both in his evidence and in submissions before me that the company simply did not have the money to pay the fees and it was unreasonable for the Hearing Officer to suppose otherwise simply because there was money in the bank.
Mr Willetts advanced these submissions with care and ability but, at the end of the day, I have reached the conclusion they must be rejected. The third statutory declaration of Mr Willetts made on 29 January 2007 suggests that at the end of February 2005 the company had funds of £49,000 and trade creditors to whom it owed a total of £35,043. Mr Willetts also stated in that same declaration that the company had a contractual commitment to pay a company called QinetiQ a further £15,000 which had not at that time been invoiced.
Upon receipt of this evidence, the Patent Office sought clarification of the financial position of the company at the end of February 2005, which clarification was duly provided by Mr Willetts in his first witness statement dated 18 April 2007. In that statement Mr Willetts explained the £35,043 to which he had earlier referred included some £8,000 claimed by QinetiQ but Mr Willetts did not consider it due and owing because it formed no part of the fixed contract total and, moreover, he had no intention of paying it. As for the further £15,000, an invoice was received from QinetiQ in June 2005 but it was not paid because the company believed the work carried out did not meet the contractual specification. At the hearing before me Mr Willetts explained the sum remains in dispute and has not been paid to this day.
In his final witness statement dated 23 July 2007, Mr Willetts provided yet further elaboration of the financial position and suggested that the company had other “ongoing obligations” at the end of February 2005, which included about £6,000 in respect of an audit of the financial statements of the company for the year ended 31 December 2004 and £2,000 as a payment to the contract director of finance. Moreover, it was anticipated solicitors’ fees of at least £5,000 would fall due in connection with the ongoing efforts at fundraising.
In the light of all this evidence I do not believe Bending Light has established it took reasonable care to ensure the appropriate fees were paid by 15 March 2005. In particular, it has not shown it was not in a position to make the necessary payment. To the contrary, the evidence of Mr Willetts suggests that at the end of February 2005 the company had up to £22,000 comprising the balance of the £49,000 and the further sum of £8,000 which the company did not consider it owed to QinetiQ and had no intention of paying. Further, the company was in dispute with QinetiQ over the balance of the contract sum, amounting to £15,000. I recognise that Mr Willetts refers in his final statement to yet further potential liabilities amounting to a total of about £13,000. But there is no suggestion these were due and owing at 15 March 2005, nor that some accommodation might not have been reached had the company sought to explain to these potential creditors the consequences of failing to pay the appropriate patent fees.
In my judgment the Hearing Officer came to the right conclusion and this appeal must be dismissed.