Polymer Logistics (Israel) Ltd v DS Smith Plc & Anor

The application before me this morning is an application by the Claimants in one set of proceedings, that is to say Polymer Logistics (Israel) Ltd., who are also one of the Defendants in other proceedings being tried with it, for a speedy trial in both sets of proceedings taken together.

It is unnecessary for me to distinguish between the individual parties on each side of the record in these proceedings. I can simply confine myself to calling the Claimant in the current proceedings and its associated company Polymer, and the other side I will call DSS.

Polymer started its proceedings first, claiming infringement of its patents. Its patents concern a system in which, without wishing to do any injustice to the inventor, the concepts of a pallet and a dolly are combined so as to produce something which has the feature of a pallet in that it can remain stable whilst bearing a stacked load but, when the occasion requires, also has wheels which can be flipped down or out so it can be moved as a dolly. It is said that this sort of concept has a considerable attraction to those involved in logistics, and particularly the logistics involved in food in supermarkets.

DSS have a similar patent and a similar product. Polymer claim that DSS's product, called K-Roll, infringes. Polymer, having started its proceedings, DSS then started its own infringement proceedings as against Polymer some time afterwards. Both those proceedings claimed infringement of the patent or patents owned by the parties. Both those sets of proceedings were started in Patents County Court, but last year were transferred to the High Court so they could be tried together there.

On 30th January of this year an order for directions was given. It contains the usual sorts of directions that one would expect of two patents actions and the trial date was specified to be not before February 2014. I am told the actual trial date is to be March 2014.

Now, by an application made slightly less than one month later on 27th February 2013, Polymer seeks to expedite that trial date and seeks the expedition of the intervening directions. It seeks a trial in the second half of July of this year. The reason for that is said to be because it fears that if a trial does not take place until March next year, that will operate in a manner which is seriously unfair to Polymer because it fears that by then market standardisation will have brought about a situation in which there is a risk that there will be a standardisation of products in favour of DSS's K-Roll product, which will mean that Polymer will not then be able to penetrate the market. I need to elaborate on that fear.

I have indicated the use to which the parties' various products are put in the logistics trade. DSS's K-Roll product is already used by Tesco, who use it for a little less than two-thirds of their requirement for products of their category. They have not yet acquired sufficient numbers of the product to have it used for 100% of their products. So far they have something like 200,000 units.

The supermarkets are one of the potential users of these products. They obviously have a need to move products into their store on trolleys and then to have the conveying item removed and brought back with more product on.

By the same token, some food suppliers are also users of these products for delivery to supermarkets. Coca-Cola is an example. Coca-Cola have been assessing these products and in particular DSS's K-Roll product. Morrisons have trialled certain of the products and, in particular, have trialled Polymer's product, but they have ceased that trial for the time being. Two metaphors have been used to describe what has happened. Polymer have been told that the project has been mothballed; DSS have been told that the project has been put on hold. It seems that the reason given for that to both parties was that other projects were more important.

The other significant player in the field is a concern called Chep. That is a concern which acquires these products and then rents them out to users in the relevant industry, which I assume to be largely but not solely the food and retail industry.

Polymer's fear is this. At the moment there is no standardisation in the market. Polymer and DSS are the two most significant players in the market, and the market was described as almost a duopoly. There are other players but they are very much more minor. At the moment they each have a shot at getting various parts of the market. However, according to Mr. Waywell, the deponent for Polymer, those operating in the market have an interest in standardisation, and that is particularly true of Chep.

At the moment both parties have their products in the market, or the market is receptive to both products. However, there is a benefit to all those using the products if there is a standardisation. Everybody then knows what product is going to arrive at (for example) a supermarket, they know how it can be appropriately handled and it makes matters administratively much more convenient for a party such as Chep, who need only deal with one product and rent it out to various users, to have one rather than two.

There is no formal mechanism for producing a degree of standardisation and Mr. Maple, the deponent for DSS, sets out a short historical narrative in which there was an attempt by an industry body to produce some standardisation but which ran into the sand. Now Mr. Maple says there is a renewed interest in standardisation, but it is not in the same way being actively promoted by a trade body, at least it is not that sort of standardisation mechanism that Polymer are concerned about.

What Polymer are concerned about is this. Tesco is a very important customer for all food suppliers. It has taken a large number of K-Roll product. It is feared that it will confine itself to that product and will start to use its market power to specify to its suppliers that it expects its supplies to be delivered on those products. Once suppliers get used to that, the suppliers themselves will decide that they would wish to supply other less demanding customers on the same product and effectively be forced into an adoption of the K-Roll product.

Coca-Cola are themselves very substantial suppliers. If they adopt K-Roll or, indeed, any other product as being the product that they wish to use to transport their drinks, then that will generate an expectation on their part that the person to whom they supply, who might otherwise have been agnostic about which product they wish to use, should be receiving it on the K-Roll or other nominated product, which will give rise to a sort of domino effect elsewhere in the business. In other words, Polymer are concerned about a de facto standardisation coming about because big players opt for one product (and in particular K-Roll) rather than another.

The same is true for Chep. If Chep decide to standardise on one product or the other, that will provide market momentum, which will eventually end up excluding the unsuccessful product from large areas of the market.

One can understand, in theory at least, how that might happen. Polymer is concerned that it might well happen in the next six months, and that by the time one gets to trial it will be too late to undo the effects. It says that there is a risk that if DSS has a freehand in the market in the next few months there is a risk that it will be the DSS product that will be the subject of standardisation, driven in particular by the interests of Tesco and Coca-Cola. The market will then become flooded as a result of a de facto standardisation across a lot of other suppliers and customers. It will not be possible to undo that once the market is flooded and standardisation has occurred

Polymer acknowledges that so far as Chep is concerned, Chep will be a very significant player, and an injunction would theoretically be available, were it to be established at the trial that the DSS product infringes. The same is potentially true in relation to Tesco; that is presumably because Tesco, at the centre, rents out the product towards the periphery. However, Polymer acknowledges (or claims) that it would be commercially difficult, if not impossible, for it to start taking proceedings against those bodies, so it would be faced with a de facto situation in which is there is a lot of product out there which is effectively excluding its own product from the market and which it cannot effectively challenge. In those circumstances Polymer fears that victory at a trial next year will be hollow because the damage will effectively be done, because the market will be flooded by the infringing competing product. Damages will not obviously repair that situation because it does not appear that the infringer, which would be DS Smith Plastics Limited, would be good for the serious amounts of money that would be involved.

Accordingly, Polymer seeks to remove this risk by accelerating the trial to July. If a trial takes place in July, according to Polymer, a decision will be available at a sufficiently early time so as to stop standardisation in favour of DSS's product, provided of course that it is successful in its action, so the problem will not arise. That, in essence, is Polymer's case for expedition.

The requirements for expedition have been set out in various cases and most conveniently appear in Daltel v Makki [2004] EWHC 1631 (Ch), in which Lloyd J, as he then was, explained them. The first of the four criteria set out there, which I need not read, is that there is a real and justifiable urgency.

In order to manage this application in an appropriate fashion I have heard submissions at the moment only on urgency and not on any other matters. The first question to be determined is therefore whether Polymer has established a sufficient degree of urgency. I have come to the conclusion that it has not.

Polymer's case is that there is a serious risk of standardisation at the end of six months. It bases that on what has happened in relation to Tesco, which is a move towards one product (not Polymer’s). It bases it on the perceived desire of Chep to have standardisation and what Chep is doing in Europe in order to try to achieve it. It also perceives from Coca-Cola's interest in apparently having one product. All of which is said, if the planets and constellations come together in the right way, to generate a serious risk of a standardisation in favour of the DSS product, which it will in practise be impossible to undo if there is a successful trial, so far as Polymer is concerned, in the first quarter of next year, in the manner to which I have referred.

It seems to me that the evidence is simply insufficient to make out Polymer's case. Tesco's interest is clear and Tesco's use of the K-Roll product is clear. So is the extent of its use. The extent to which it will use its purchasing muscle to enforce that is less clear, but what does appear from the evidence, and in particular the evidence of Mr. Maple which I accept, is that things do not move that quickly in this area of the market. He has set out some history of the dealings with Tesco, the activities of the body which sought standardisation but failed to get it, and of other dealings, including the Morrison trial, which demonstrate that the supermarkets and the supplying companies are cautious about major changes which will affect the logistics side of their operation. It would be a disaster for them if logistics broke down, which explains the caution and the slow progress towards a solution on the part of the customers.

Bearing in mind where the market is in this case, which is, as Mr. Lykiardopoulos for the DSS expressed it, fragmented, it is not really sensibly conceivable that the market will suddenly come together in a consolidated unfragmented form within six months, so as then to lead to a flooding of the market.

The history of the development of the deployment of these products bears that out. It also seems to me that there is another reason why it is unlikely to happen. Morrisons have mentioned to at least one of the parties that the reason they have not yet standardised on a product, apart from the fact they have abandoned their trial, is because of these proceedings. It seems to me to be highly unlikely that there will be a standardisation of the product while these proceedings are pending. That is because even if it appears that the major users of the products would not be at risk of being sued by Polymer as a result of Polymer's (to my eyes) slightly surprising concession in this application, nonetheless the future supply chain cannot be guaranteed.

It is not, on the evidence, likely that all people, like all the major players who are likely to want to be supplied with a product, will be able to take their entire product for the next few years in a period of time, after some notional standardisation, in about six months. If they cannot get all they are likely to want in that time then they run the risk that there is a trial in March which demonstrates that the product infringes and that there is then an injunction against Smith. If there has been standardisation in favour of Smith's product at that time, there can be no replacement product and no further deliveries of the product once an injunction is granted against DSS. That seems to me to be a serious potential disruption in the supply chain, particularly for an outfit such as Chep.

In those circumstances, in an industry which is cautious about deploying these products, it seems to me to be unlikely that there will be a rush into a form of standardisation, knowing that there is a risk that further supplies of the product will not be available after March or April of next year, because Polymer will not shrink from getting an injunction against DSS. That, too, seems to me to be a factor which is likely to militate against a de facto standardisation of product in the next six months.

Putting the matter shortly, as Mr. Lykiardopoulos submitted to me, the six month figure is a figure effectively plucked out of the air by Mr. Waywell when giving his evidence in support of this application.

I accept that the market might wish to have standardisation, and I accept that someone like Chep would be likely to wish to have standardisation, but there are all sorts of reasons, amongst them being those which I have given, and which also include the fact that standardisation in Europe looks to be rather more difficult for Chep, which suggests strongly that there is unlikely to be any damaging degree of standardisation between now and March.

In the circumstances, in my view, the evidence in support of the urgency of this application is not sufficient to demonstrate that it is right that a trial date which was apparently not unacceptable to the parties in January should suddenly be deemed to be inappropriate, such that the matter now has to be brought on at something of a rush (and in my view it would be a rush) in the middle of July.

In the circumstances, Polymer fail at the first hurdle. It has not established a sufficient degree of urgency to justify an expedited trial, and I so rule. In those circumstances it is not, as I understand it, necessary for me to go on and consider any other matters in this application.