Tulane Education Fund v The Comptroller General of Patents

This is an appeal from the Decision of Ben Micklewright, the Hearing Officer acting for the Comptroller, dated 20 July 2011. The case concerns SPC/GB99/033 (the SPC), which is in the name of Tulane Education Fund (the Appellant).

The application for the SPC was filed on 9 September 1999 and the SPC was granted on 11 August 2000. The basic patent upon which the SPC application relied expired on 10 July 2008 and the SPC was due to come into effect on 11 July 2008.

However, pursuant to paragraph 5 of Schedule 4A to the Patents Act 1977, an SPC does not take effect unless either (a) the prescribed fee is paid before the end of the prescribed period or (b) the prescribed fee and any prescribed additional fee are paid before the end of the period of six months beginning immediately after the prescribed period. The prescribed period is defined in Rule 116(2)(a) of the Patents Rules 2007 (Footnote: ¹) as the three months ending with the start date, and the start date is defined in Rule 2(1) of the Patents Rules and Rule 6(5) of the Patents (Fees) Rules 2007 (Footnote: ²) as the first day following the day on which the basic patent expires. It follows that in this case, the start date was 11 July 2008 and the prescribed fee was due between 11 April and 11 July 2008; alternatively the prescribed fee and additional fee were due before 11 January 2009.

The Appellant granted an exclusive licence under the Patent (and SPC) to Æterna Zentaris GmbH, who instructed a third party Dennemeyer and Company Sarl (“Dennemeyer”), to pay its various patent and SPC fees, including the prescribed fee in question in this case (which amounted to £4000). Dennemeyer is a Luxembourg based agency that specialises in the payment of fees in relation to patent and other intellectual property rights. Dennemeyer failed to pay the prescribed fee within the prescribed period, but attempted to pay it (without the additional fee for late payment) on 22 July 2008, which is within the six months immediately following the prescribed period.

Dennemeyer attempted to pay the fee using the electronic patent, design and trade marks renewal system. The payment was made at the same time as 3075 other payments for various third party patent renewals.

The payment was given a particular reference. The first part of the reference included the SPC number SPC/GB99/033. The second part of the reference included the client code and cost centre, and the client reference number.

However, since the electronic renewal system is intended for the renewal of patents (and not SPCs), it automatically converted the SPC number into a patent number GB0099033. This number was not recognised by the system as a valid patent number. As a result, the system generated an automatic report stating that the payment had been rejected because the patent number quoted was invalid.

The evidence from Dennemeyer is that the relevant personnel were “confused” by this report because they had not instructed payment of a patent with that number. This is despite the fact that the “Customer Ref" number given on the report is the same as the client code and cost centre and the client reference number that Dennemeyer had used as part of the payment reference, and therefore could have been used to work out to which payment the report was referring.

Ms Grasser of Dennemeyer in her witness statement in these proceedings says that the payment officer usually waits for a notification of rejection of a patent renewal, but that since one was not received in this case no further action was taken (Grasser para 14-15). It is, perhaps, surprising that Dennemeyer did not take a more proactive role in getting to the bottom of what the rejection was about, bearing in mind that the rejection report advised (twice) “Please check your records and refile”. Furthermore it is the normal practice of the Office (as set out in part 8 of Patents Form SP2 - the correct form for paying SPC fees) to send a certificate once SPC fees have been paid, but there is no evidence that Dennemeyer was expecting one or was alerted when one did not arrive.

It is apparent that Dennemeyer (i) failed to appreciate that the payment of SPC fees is subject to its own system and procedure and (ii) therefore incorrectly assumed that it could use the electronic patent renewal system to pay the SPC fees. Furthermore, these errors did not come to light until 16 January 2009, shortly after the period of late payment for the prescribed fee had expired (see Grasser para 16).

The consequence of the failure to pay the prescribed fee in time is that the SPC lapsed on the date of expiry of the basic patent, ie 10 July 2008. As a result, the Appellant (who only became aware of the problem on 20 February 2009), applied to the Office (i) for a correction of an irregularity under rule 107 of the Patents Rules 2007; (ii) for the SPC application to be reinstated under s.20A of the Act; or (iii) for the SPC to be restored under s.28 of the Act.

In his decision dated 20 July 2011 the Hearing Officer rejected each of these applications. In this appeal the Appellant appeals against the decision on applications (i) and (iii), but not (ii). The Appellant has a further ground of appeal in that it contends that paragraph 5 of Schedule 4A of the Patents Act is ultra vires. This matter was addressed by Dr Wright, the Patent Attorney who appeared before the Hearing Officer on behalf of the Appellant

I shall deal with each of these three grounds of appeal in turn.

Rule 107 of the Patents Rules 2007 is headed “Correction of Irregularities” and provides as follows:

Rule 107(3) is the relevant rule in this case, because it concerns a period of time specified in Part 1 of Schedule 4 to the Rules (namely Rule 116(2)). However, in accordance with that Rule, the time period can only be extended if there has been an irregularity by the Comptroller, an examiner or the Office. It is clear from Rule 107(1) that it means some irregularity of procedure.

The requirement for establishing when rule 107(3) applies was explained by the Court of Appeal in M’s Application [1985] RPC 249 at 272:

Mr Johnson, who appeared before me on behalf of the Appellant, submitted that the Comptroller and/or the Intellectual Property Office (the “Office”) committed two errors and one omission:

Error 1: On or about 22 July 2008, the Intellectual Property Office's software erroneously converted the entry in the data file from “LP 21 SPC/GB99/033” to “GB0099033”;

Error 2: On 29 July 2008, the Intellectual Property Office’s computer system sent an automated response erroneously stating that the rejected payment related to “GB0099033”;

Omission: The Intellectual Property Office omitted to send an adequate response (or any response) in relation to the rejection of the payment “LP 21 SPC/GB99/033”.

Mr Johnson submitted that the Hearing Officer erred in principle by his decision being predicated on identifying as important “the original mistake” (Decision, paragraph 28). The correct approach, he submitted, was to identify “an error, default or omission” and not ‘the original error, default or omission”. By concentrating on the origin of the error, Mr Johnson submitted, the Hearing Officer’s approach wrongfully gave little or no weight to the three errors or omissions identified by the Appellant.

The Hearing Officer found that the original mistake was that "the applicant used the wrong system to pay the fee.” The Appellant submitted that “it is not aware of any rule, practice note or similar which precludes the electronic payment of fees in relation to supplementary protection certificates” and that “the guidance, such as it is, only sets out how to code the payment of renewal fees. Nowhere does it state that supplementary protection certificates cannot be paid using the electronic system.”

The Hearing Officer found that the electronic payment system “operated as it was designed to do” and so there was no error, default or omission.

The Appellant submitted that the Office was responsible for the design and operation of that system and so cannot rely on the fact that an erroneous result was generated by the correct operation of a poorly designed system. Mr Johnson submits that the Office is responsible for results generated by that system as if they were generated by a human being. A transcription error by a human so that “LP21 SPC/GB99/033” becomes “GB0099033” would clearly be erroneous, as would any communication from the office to the Appellant following such an error.

Miss May, who appeared before me for the Comptroller General of Patents, submitted that none of the alleged errors are errors of procedure committed by the Comptroller of the Office for the reasons given by the Hearing Officer in paragraphs 28 and 29 of the decision under appeal.

So far as error (i) is concerned, Miss May points out that Rule 116(5) of the Patents Rules provides that payment of SPC fees must be done using form SP2. The electronic renewals system provides means for paying patent, trade mark and designs renewals fees and there is no suggestion in the guidance referred to by the Appellant, or elsewhere, that the system can be used to pay fees in relation to SPCs. The system has no function which enables form SP2 to be used in connection with any payment

The issue that I must decide is whether the attempt to convert the SPC number into a patent number by the system is an error. I accept Mr Johnson’s submission that it makes no difference that this is done by a computer system rather than a person.

However, I do not accept that an attempt by someone, or, in this case, a computer program, to interpret a reference number entered into an inappropriate payment system by converting it into a format appropriate for the payments for which the system is intended, can be described as an error. Nor do I agree with Mr Johnson that, if this had been done by a human, it would clearly be erroneous. It was not a “transcription error” but was an attempt to make sense of an erroneous entry by Dennemeyer For this reason, I find against the Appellant in respect of the first alleged error.

So far as the second alleged error is concerned, applying the test set out in M’s Application quoted above the first point that arises is whether it can be said that there is some sort of obligation on the Office to send a rejection quoting, accurately, the number used in the payment application when it rejects that payment.

I believe that there is such an obligation on the Office. I do not think that it is right to send a rejection that does not accurately identify the number used in the payment application. In a system that is clearly designed to cope with substantial numbers of applications being made by one party (3076 payments in this case), it is important that the paying party can identify, without difficulty, which payment has been refused. Whilst it is reasonable, and in some cases may be very helpful, to attempt to convert a number that is not recognised by the system into one that is in the right format, this does not mean that it is appropriate to use that different format when rejecting the payment because that number has not been recognised. In such circumstances, any notification sent to the party trying to make the payment should refer to the reference number as supplied by that party.

The second point from M's Application is whether that error contributed to the failure to pay the appropriate fee in time. I can understand that Dennemeyer would find it difficult to identify which of the 3,076 payments that it had attempted to make was being rejected when the rejection referred to a number which was not exactly the same number it had used in respect of any of the payments and accordingly I find that it did contribute to the failure.

The third point is whether it was a partial cause of the failure in the sense of having actively brought it about. This does not mean that it has to have been the sole or even the major cause but it is not enough that without it, the failure would not have occurred.

In the present case can it really be said that the failure by the Office to identify accurately the payment that was being rejected actively brought about the failure? I do not believe that it can. In the first place, Dennemeyer was paying only the prescribed fee although it was out of time so that the supplemental fee was required. Secondly, the payment was not accompanied by form SP2 as required by the Rules. Thirdly, although the number of the SPC had been altered to put it in the format of a Patent number, the payment and client reference numbers were unaltered.

I am far from convinced that, even if the error had not occurred, the correct fee would have been paid in time. For all these reasons, I do not consider that the error by the Office which I have found to have been made was sufficiently causative to enable me to apply Rule 107(3).

So far as the third error identified by the Appellant is concerned, in so far as this is an error I find that it falls within the same area as the second error. Moreover, the Office did send notices to the address for service on the Register that the payment had not been made and sent copies of form SP2 for completion and return with the payment. There was nothing from the Appellant to indicate to the Office that Dennemeyer was responsible for making the payment.

In all the circumstances, I think the Hearing Officer was correct to find that Rule 107(3) could not help the Appellant in this case.

Section 28 of the Patents Act 1977 provides as follows:

Section 128B, under the heading “Supplementary Protection Certificates, provides as follows:

Article 18 of Regulation (EEC) No 1768/92 provides:

Section 1(1) of Schedule 4A provides that in the application to supplementary protection certificates of the provisions of this Act listed in sub-paragraph (2) ..references to a patent are to a supplementary protection certificate;

Although sections 27 and 29 are listed in sub-paragraph (2), section 28 is not.

The Hearing Officer stated:

The Appellant submits that the procedure under section 28 of the 1977 Act should have been available so as to enable the restoration of the Appellant’s lapsed certificate following is failure to pay the relevant fee and that the Hearing Officer misunderstood the application of Schedule 4A.

Paragraph 1 of Schedule 4A, he submits, does not “apply” sections at all, it merely provides a gloss where those sections apply by reason of the direct applicability of Regulation (EEC) No. 1768/92. This is clear, he says, from the wording of that provision “In the application to supplementary protection certificates of the provisions of this Act in sub-paragraph (2)”. It is suggested that the rationale of the drafter was not to set out the provisions which apply to SPCs, but rather to provide a gloss to provisions “believed” already to be applying to SPCs. The approach adopted, it is suggested, would have been based on three premises.

Mr Johnson identifies these provisions as follows: First, certain provisions of the 1977 Act apply to certificates in any event by reason of direct applicability. This is the case whether they are mentioned in Schedule 4A to the 1977 Act or not. Secondly, if a provision was listed in Schedule 4A and it could not apply to certificates because to do so would be contrary to the Regulation, it would not so apply. Thirdly, provisions mentioned in the 1977 Act, which might not otherwise apply by reason of direct applicability, might be applied to certificates by reason of being mentioned in Schedule 4A.

He submits that it appears that the drafter adopted the first premise in relation to paragraph 1 of Schedule 4A and the third premise in relation to paragraph 2 of that Schedule. Accordingly, the provisions listed in paragraph 1(2) are not “special provisions for certificates” within the meaning of Article 18, but a way of glossing the Act so as to apply “the national law to the corresponding basic patent”.

It is the Appellant’s case that to ascertain whether a provision in the 1977 Act applies to supplementary protection certificates (whether it is listed in Schedule 4A or not), the court should adopt an approach similar to that put forward by Mr Walker in Abbott Laboratories’ SPC Application [2004] RPC 20. Mr Walker applied a three stage test. First, checking to see whether there are provisions on the matter in the Regulation itself. Secondly, looking to see if there is a “corresponding provision” in domestic patent law. Thirdly, and finally, looking to see whether there is special provision in domestic law for certificates.

It is accepted that there are no provisions in the Regulation itself. On the second point, the Hearing Officer held:

It is submitted by the Appellant, that this finding was clearly wrong. The fee paid under paragraph 5 of Schedule 4A is not of a different type to a patent renewal fee. It is based on Article 12 of the Regulation and so is intended to be exactly the same as a renewal fee, furthermore:

Further, as Mr Walker noted inAbbott Laboratories' SPC Application

The Appellant’s research suggests that at the time the original Regulation was adopted the restoration of lapsed patents existed in ten of the twelve member states (all except Portugal and Greece). It was submitted before me that when Article 18 was adopted it would have been envisaged that restoration should apply to supplementary protection certificates in those countries where patent restoration existed.

It was submitted, therefore, that section 28 should be applied to supplementary protection certificates. As it was not disputed that the failure to pay the fee was unintentional (Decision, paragraph 35), it is the Appellant’s case that the application for restoration of SPC/GB99/033 should have been accepted.

Miss May for the Comptroller submits that section 28 has no application in the case of SPCs. First, she submits, a proper reading of S.128B and Schedule 4A demonstrates that s.28 is one of theprovisions of the Act that does not apply to SPCs. Specifically, s.128B(1) states that Schedule 4A “contains provision about the application of this Act in relation to SPCs”. Schedule 4A(1)(2) and 4A(2)(2) list the provisions of the Act that apply to SPCs. Since s.28 is not referred to in these lists, it is clear that it does not apply to SPCs.

Second, this literal reading of S.128B and Schedule 4A is reinforced by the Explanatory Memorandum and Impact Assessment of the Patents (Compulsory Licensing and Supplementary Protection Certificates) Regulations 2007, the SI that amended the Act to bring these provisions into effect. These materials are publicly available via the Government’s legislation website (www.legislation.gov.uk) and at the Houses of Parliament. They make it clear that the purpose of the 2007 Regulations is to spell out expressly which provisions of the Act apply to SPCs and which provisions do not. In particular to paragraph 7 of the Explanatory Memorandum states:

See too paragraph 6-7 of the Impact Assessment, which states (emphasis added)

Third, it is clear that s.28 cannot apply to the SPC in this case in any event because the conditions of the section are not met. In particular, s.28 applies to a patent that has “ceased to have effect”. However, whilst the SPC in this case has been granted, it has not taken effect. This is because, pursuant to Schedule 4A paragraph 5, an SPC only takes effect when the relevant fees have been paid. If, as here, the fees are not paid the certificate does not come into effect at all and s.28 cannot apply.

Mr Johnson submitted that it was not appropriate to look at the Impact Assessment to construe the legislation and I agree. However, he did not make the same submission with regard to the Explanatory Memorandum. The Explanatory Memorandum confirms what I believe would be the normal construction put on the provisions in the Act and Schedule 4A, i.e. that the Act was setting out those provisions relating to patents which would apply to SPCs and that what was not set out there would not so apply. The gloss makes the provisions apply sensibly to an SPC.

I am not so convinced by the third argument. If I was otherwise convinced that section 28 was intended to apply to SPCs I would not find it difficult to construe “ceased to have effect” in such a way that it covered a situation where the SPC was granted but did not come into effect because of the failure to pay the prescribed fee.

The fact that restoration for lapsed patents was available in ten of the twelve member states at the time the Regulation was passed does not persuade me that such a procedure was intended to be available under Article 18 of the Regulation. The Act does provide special procedural provisions for SPCs. I do not read a requirement into Article 18 that there must be procedural provisions for the restoration of a lapsed SPC. I find this to be logical since, in the United Kingdom, the annual fee is paid in a single lump sum so that the problems of missing a payment can only arise at the beginning of the period set for the SPC.

However, that is not the end of this ground of appeal because Mr Johnson has a further argument as follows. Section 128B (2) defines an SPC as being a certificate issued under “Council Regulation (EEC) No 1768/92 of 18 June 1992”. Mr Johnson correctly points out that Regulation 1768/92 was revoked by Article 22 of Regulation (EC) No 469/2009 and from 6 July 2009 it is that later Regulation that applies throughout the European Union, including the UK.

Section 20A of the Interpretation Act 1978 provides that a reference to an EU instrument that has been “amended, extended or applied” includes a reference to that instrument as so “amended, extended or applied”. That provision does not apply where an EU instrument is repealed and reenacted (c.f. Interpretation Act 1978 s. 17). Accordingly, as a matter of British law, Mr Johnson argues, a reference to Regulation (EEC) No. 1768/92 cannot be read as a reference to Regulation (EC) No. 469/2009. Thus, once Regulation (EC) No. 469/2009 came into force Schedule 4A no longer had an application to medicinal certificates. Accordingly, the court must once more assess whether a particular provision of the Patents Act 1977 applies to supplementary protection certificates.

Miss May points to Article 22 of Regulation (EC) No. 469/2009 which repeals Regulation (EEC) No. 1768/92 and then states “References to the repealed Regulation shall be construed as references to this Regulation and shall be read in accordance with the correlation table in Annex II”.

Thus, although the Interpretation Act does not provide for the situation where EU legislation is repealed, the UK courts are required to construe national legislation in accordance with EU legislation so far as is possible. In this case I have no hesitation in holding that the clear intention of Regulation (EC) No. 469/2009 was that it was to replace Regulation (EEC) No. 1768/92 for all purposes and section 128B should be construed as referring to that Regulation.

For all these reasons I find that the Appellant fails in respect of its second ground of appeal.

Paragraph 5 of Schedule 4A of the 1977 Act was intended to implement Articles 12 and 14(c) of Regulation (EEC) No. 1768/92. It reads:

Mr Johnson points out that Regulation (EEC) No. 1768/92 only provides for an application fee (in Article 8(2)) and the annual fee in Article 12. No other fee is permitted. Accordingly, only if the fee in Paragraph 5 of Schedule 4A (the relevant fee) is permitted in accordance with Article 12 would the domestic provision be intra vires. Otherwise, the Secretary of State’s inclusion of that provision in the Patents (Compulsory Licensing and Supplementary Protection Certificates) Regulations 2007 (SI 2007/3293) was outwith section 2(2) of the European Communities Act 1972.

Article 12 provides for “annual fees”. In other language versions the references are to: in French “de taxes annuelles”, in German “Jahresgebühren”, in Spanish “de tasas anuales” and in Italian “di tasse annuali”

This ordinary (literal) meaning of the word “annual” accordingly to the Shorter Oxford Dictionary is “Reckoned, payable, or engaged by the year” and “recurring once every year". Further, notwithstanding “annual fees” should be given an EU meaning, the meaning of “annual” has been considered in English law (and, in particular, in tax law). In Moss Empires Ltd v IRC [1937] AC 785, 795-6 Lord Maugham indicated that “annual” means a payment need not be every year but has “the quality of being recurrent, or being capable of recurrence”; this has been repeatedly followed and, most notably, by a later House of Lords in IRC v City of London [1953] 1 WLR 652.

The mechanism for paying the prescribed fee in paragraph 5 of Schedule 4A is a single payment and does not “recur”; and so it cannot be described as an “annual fee”, submits Mr Johnson.

Further or alternatively, he submits, the original proposed text for Article 12 (Footnote: ³) made provision for “renewal fees”. It is submitted that despite the phrase “annual fee” replacing “renewal fee” the type of fee was not meant to change in nature. Further, in the Commission Proposal for the Plant Protection SPC (COM (94) 579 final) despite the draft proposal referring to “Annual Fees” (p.43), the explanatory memorandum described them as “renewal fees” (see paragraph [77]). Indeed, the term “annual fee” (or its translation) is used for renewal fees in the intellectual property legislation of other member states.

According to the Shorter Oxford English Dictionary, the meaning of the word “renewal” is “the action of extending the period of validity of a licence, subscription, or contract”. It therefore requires there to have been a “period of validity” to be renewed.

Further, Article 14(c) of Regulation (EEC) No. 1768/92 states:

“The certificate shall lapse ...(c) if the annual fee laid down in accordance with Article 12 is not paid in time;”

A certificate “lapsing” requires there to be validity and effect to lapse. According to paragraph 5 of Schedule 4A, the failure to pay the fee leads to the rule that the certificate “does not take effect” until the payment has been made. This means that there is no “period of validity” which is being renewed or which can lapse.

Mr Johnson submits that the relevant fee is not, therefore, an annual fee or a renewal fee. Further, it is not an application fee (which is provided for in Patents (Fees) Rules 2007, r. 2, Sch 1, Form SP1). In effect, paragraph 5 of Schedule 4A, is creating a sui generis fee. A fee such as this is not envisaged by Regulation (EEC) No. 1768/92 (or indeed, Regulation (EC) No. 469/2009) and so its creation under s. 2(2) of the European Communities Act 1972 would be ultra vires.

The Appellant's research suggests that only Spain and Bulgaria has a similar “one off" fee to that adopted in the United Kingdom. All the other twenty four member states have annual fees for supplementary protection certificates (although Luxembourg and France allow applicants, at their election, to pay all the annual fees at the same time).

Further, Article 13(1) provides “The certificate shall take effect at the end of the lawful term of the basic patent”. The certificate taking effect is a mandatory requirement. It is not contingent on any fee being paid. As a certificate can only lapse once it has taken effect, paragraph 5 of Schedule 4A is contrary to Article 13(1). This confirms once more that it is ultra vires and without effect.

Accordingly, as paragraph 5 of Schedule 4A should be treated as a nullity, a supplementary protection certificate has effect without the payment of the relevant fee and continues in effect until it expires in accordance with Article 14 (subject to any fee levied in accordance with section 25 as applied to supplementary protection certificates).

The first proposition relied upon by Mr Johnson is that a requirement for a single payment cannot fall within the provision in Article 12 allowing “annual fees”. However the single payment required under paragraph 5 of Schedule 4A is calculated according to the number of years for which the SPC will be in force. Mr Johnson accepted that the Regulation allowed Member States to determine when payments should be made. In my judgment, the requirement for the annual fees to be paid in a single payment to be made before the SPC comes into force is within the Regulation.

The second proposition is that, although the draft Regulation referred to “renewal fees” and this was changed to “annual fees” in the final version, it should be read as though it still referred to “renewal fees” in Article 12. I think there is more force in the opposite argument, as put forward by Miss May, that this suggests that it is not a renewal fee and the change was deliberate. I find that this argument gives no basis for saying that the requirement for the payment of a single fee before the SPC comes into force is ultra vires.

The third proposition is that because Article 14(c) of the Regulation provides that the SPC “lapses” if the annual fee is not paid in time, this does not allow the UK to provide that the SPC “does not take effect” if the annual fees are not paid within the time specified. However, as Miss May points out, the SPC is granted before the fee must be paid. I do not see any difference between a granted SPC not taking effect and lapsing.

Finally, the fourth proposition is that because Article 13(1) provides that the certificate shall take effect at the end of the lawful term of the basic patent, this cannot be contingent on any fee being paid. I do not believe that such a construction of the Article is consistent with the Member States being able to charge annual fees and being able to determine when such fees must be paid. I do not believe that it is an absolute requirement that the certificate takes effect but is subject to the certificate holder complying with such administrative requirements as the Member States my provide, including particularly the payment of the annual fees.

Accordingly I dismiss the Appellant’s appeal on all grounds.