Koninklijke Philips Electronics N.V. v Nintendo of Europe GmbH

This is the hearing to deal with the various consequential matters arising from my judgment in this case between the patentee Philips and Nintendo [2014] EWHC 1959 (Pat). I held that the ‘484 patent was invalid but the two other patents '498 and '650 were valid and were infringed by the Nintendo Wii game console. My finding that '498 and '650 were valid did not relate to the patents in the form they were granted but related to various amendments proposed by Philips which produced valid claims.

The main judgment mentions a problem caused by the manner in which Philips had put forward its amendments in this case as being an approach which was likely to lead to mistakes being made. I am bound to say that the nature of the dispute that I have heard this morning is yet more evidence that the approach that Philips took to amendment in this case was indeed one which risked mistakes being made.

After judgment Nintendo, rightly and fairly, pressed Philips' legal team for a full set of precisely what claims (and for that matter what amendments to the specification) Philips were contending were the appropriate amendments that should be made following the judgment. Mr. Nicholson referred to the correspondence which went on for just under a month. Eventually on 9th July Nintendo were provided with the amendments. Mr. Nicholson then tells me -- and it is clear on the evidence that this happened -- that various matters were raised by the legal team for Nintendo, identifying problems with the set of claims and the amendments which had been proposed by Philips. Those were points that were well taken.

Mr. Nicholson was sensitive to the suggestion that his clients were raising matters too late and were making what were called nit-picking remarks. There is no foundation in that sort of suggestion. In fairness to Mr. Hinchliffe, he did not really put it that way. But it is important to be clear that the matter of amending patent specifications is extremely important and it is a process in which detail matters and in which precision is of vital importance.

The points made by Nintendo after receiving the amendments from Philips were demonstrably good points since Philips abandoned a number of the elements of the amendments they put forward on 9th July and did not press them before me. In particular, I refer to the proposed amendments to claims 6, 8 and 9 which they had already abandoned before trial. They were in the set proposed on 9th July but are not now being proposed before me.

There is no need to go further through the history of this matter. I will deal with the claims and amendments as they are now.

The first point is this. The set of claim amendments which Philips submit should be allowed in relation to the '498 patent essentially involve claim 1 in the form of claim 1D; claims 2 and 3 in the forms of claims 2A and 3A and the remaining claims in the patent the same as granted, with no other difference. There is no renumbering needed. The descriptions of claims 1D, 2A and 3A are in the main judgment.

The first objection taken by Nintendo is that this set of claims, what one might call 1D, 2A and 3A, was not before the court at trial. I can sympathise with Nintendo since it is absolutely the case that Philips never wrote out that set of claims. Indeed I can also shoulder some of the blame since I was the one who had to take the trouble to write out exactly what it was that Philips wanted. In writing the main judgment I did wonder about writing out claims 2B, 2C, 2D and so forth. I decided that life was too short. It was clear that a set of claims consisting of 1D plus 2A and 3A was what Philips were after. I do not accept Mr. Nicholson's submission that that set of claims was not before the court at trial. It was clear that that was what Philips were seeking in the various conditional circumstances that might have arisen, and in fact did arise. Accordingly it is fair for Philips to seek to amend the patent in that way.

The next point I need to decide on '498 relates to a point on the specification. Before trial Philips did not propose any amendment to paragraph 14 of the '498 patent but it needs to be amended to deal with the added matter objection which had been made to claim 1. As drafted paragraph 14 is as follows:

"The first object is realized in that the system further comprises at least one localization beacon capable of emitting electromagnetic radiation for use to the digital signal processor and wherein the digital signal processor is arranged to recognize to where the pointing device is pointing but using information derived from the captured electromagnetic radiation".

In Philip’s post trial proposals, paragraph 14 is to be amended this way:

"The first object is realized in that the system further comprises at least one localization beacons capable of emitting electromagnetic radiation for use to the digital signal processor and wherein the digital signal processor is arranged to recognize to where the pointing device is pointing but using information derived from the captured electromagnetic radiation".

The point Mr Nicholson makes is that to be precise the paragraph ought to refer to “room localisation beacons” and not just “localisation beacons”. Although it is a small point, in my judgment Mr. Nicholson is correct. The proper basis in the application refers to “room localisation beacons” and I can see no good reason why the word “room” should be absent. It is not clear to me that it would make any difference but it is at least capable of making a difference and it ought to be in there. I will therefore permit paragraph 14 to be amended as proposed provided the word “room” is inserted before the word “localisation”.

The same amendment in the same form should be made to ‘650; that is at paragraph 10 of the '650 patent.

There were also other proposed amendments to the specification to do with claim numbering, but they have been abandoned by Philips, rightly, because they related to the claims 6, 8 and 9 amendments which have been abandoned as well. I think that deals with everything relation to '498.

A matter which I am not going to deal with at this stage is whether section 63(2) applies. Subject to section 63(2) the right thing to do is to permit Philips to make the amendments they seek in relation to '498 with the adjustments I have mentioned already. Subject to 63(2) I will permit Philips to make the amendments described already.

I now turn to deal with the '650 patent. The '650 patent raised a point on the specification, paragraph 10, which I have dealt with. The other important point is this. In relation to the '650 patent I found that claim 3 as granted was invalid. Accordingly, ordinarily you would expect that the claim should be deleted. However, Mr. Nicholson submits that the claim played a part in the true construction of claim 1 and the words “motion sensing means”. Thus if claim 3 is removed there is a risk of changing the true interpretation of the patent.

The problem is that if I leave claim 3 in the patent then one has a patent which contains an invalid claim even though a claim in the form of claim 1 as proposed to be amended (which involves putting together claims 1 and 2 in a way which is otherwise entirely unobjectionable) would be valid. Nintendo recognise this and contend that therefore the patent should be revoked in its entirety.

Section 63(2) is concerned with partial validity. There one may be entitled to leave an invalid claim in a patent on the register in this sort of case. Even though a patent normally would be amended if it was found to contain both an invalid claim and a valid claim, a finding of partial validity may not mandate that a patent has to be amended in those circumstances.

Mr. Nicholson submits that since, before me, Philips do not seek to leave the patent with claim 3 in place under the partial validity jurisdiction, he submits that I should refuse the amendment relating to claim 3 and revoke the patent.

Mr. Hinchliffe, having heard what Mr. Nicholson says, states that his clients would be prepared to leave the patent with claim 3 in it, but his primary submission is that Mr. Nicholson's argument is wrong and the claim can be deleted and should be deleted since (a) it is invalid and (b) although it played a part in the finding on construction it was not the only factor to be considered.

As far as I know this is the first time a point like this has arisen. Neither counsel has been able to find a case like this. The case is one in which a claim which played a part in construction on what is sometimes known as the doctrine of claim differentiation, has been found to be invalid for a completely different reason. Therefore it would ordinarily be revoked, but that then raises the problem that Mr. Nicholson has raised about claim interpretation.

Mr. Nicholson's argument has some merit that taking the patent without claim 3 in isolation might lead one to construe it in a different way from the way I have construed it in my judgment. Nevertheless it may be that the answer is that I should delete the claim anyway on the basis that the court has determined the true construction of claims 1 and 2 as a matter of law. Moreover one might say that the problem Mr. Nicholson raises, while at least arguable, is in practice unlikely to pose a real problem since anyone interested in this patent in future will find and read the judgment. On the other hand, there is no authority dealing with this and this is a novel situation.

I am not prepared to decide this matter in this way. This is another problem caused at least in part by the fact that Philips have not proposed the amendments to this patent in a way which has been of assistance to the court. They should have raised these matters earlier and allowed these matters to be dealt with properly. If they had, then this matter could have been argued out properly before me. However, I am not going to prejudice Philips to the extent of simply saying that it is all too late. It seems to me that the precise question of what to do about the amendment to claim '650 needs to be resolved properly, which means that the patentee needs to be able to have time to consider the point raised by Mr. Nicholson and decide whether it seeks either to delete the claim because the point is a bad point or to leave it in under section 63. The matter needs to be looked at properly. Counsel need to look at the law properly and the matter will have to be adjourned. I will hear the parties as to how long that needs to be. I do not anticipate that it should be adjourned for very long. I believe those are all the matters I need to resolve.

There is no dispute that ordinarily, having found a patent is valid as amended and infringed by the defendant, the court would order an inquiry as to damages or account of profits, with a time for an election. Ordinarily the court would also make an order such as the one in paragraph 10 of the draft:

“The Defendant do pay to the Claimant all sums found due to the Claimant on taking such inquiry or account, together with interest thereon pursuant to section 35A of the Senior Court Act 1981 and/or pursuant to the Court's equitable jurisdiction.”

Mr. Nicholson does not resist that order, but he submits that the relatively recent judgments in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd[2013] UKSC 46; [2013] 3 WLR 299 and IPCom GmbH & Co KG v HTC Europe Co Ltd [2013] EWCA Civ 1496 mean that an undertaking is also required from Philips at this stage because once the order is made, to use the Latin tag the court would normally be functus officio. The undertaking sought by Nintendo is from the claimant:

“to pay to the defendant any sums ordered to be paid pursuant to that after the inquiry, including repayment of those sums in the event that the '650 patent is amended or revoked”

The Court of Appeal in IPCom (paragraph 49) held that an undertaking might be required in certain circumstances to deal with effects of Virgin if proceedings are to continue. There is quite an important point rolled up in the debate before me but it has not been possible to explore fully the details of the problem.

The point that Mr. Nicholson is seeking to preserve with the undertaking is to ensure that if something occurs in future to the '650 patent which means that sums should be paid back which had by then already been paid over then a mechanism exists to achieve that result. Thus the undertaking in the form I have expressed it should be extracted from the patentee.

However even if 650 is revoked or amended there are other complexities involved. There is another patent in this case (‘498). Also amendments made in future in the EPO might not mean that any sums should be repaid. These are all matters for the future.

Mr. Hinchliffe contends that he too is seeking to ensure that the parties can take whatever points they wish to take at a later stage if necessary. He also wishes to preserve for his client the ability of Philips to say, if appropriate, that if or when Nintendo ever do seek to take this point it is too late to fairly require repayment of the sums. Philips is prepared to give an undertaking, but not in the terms that Mr. Nicholson is after. The undertaking Philips is prepared to offer is

“And upon the claimant undertaking to the defendant to repay to the defendant any sums ordered pursuant to this order should the court so direct.”

I will accept the undertaking from Philips in the term it is offered. That is the undertaking the patentee is prepared to offer. I will, however, also give Nintendo liberty to apply. The liberty is strictly limited to the working out of paragraph 10, i.e. the order for payment. The liberty will run until the payments are due to be made and will not run after it. The liberty is to submit that there should be a different order for payment having regard to any events which take place in the EPO relating to the '650 patent. The purpose of that is to preserve both sides' ability to take whichever points they feel are appropriate in the circumstances going forward in this case.

The overall costs expended by the parties in this litigation are as follows. Philips' overall costs of the proceedings were about £1.98 million. Nintendo’s overall costs were about £2.3 million.

There were three patents in suit, although it is important to note that of the '498 and '650 patents, one is a divisional of the other, and therefore really the case was about two patents.

I found that the '484 patent was invalid, based on a piece of prior art called World Class Track Meet. It would have been infringed by the Nintendo Wii console had it been valid, but because the patent was invalid the console does not infringe. The issue of infringement was contested and Nintendo lost. Various other issues relating to '484 were contested. There were objections of added subject matter and other bits of prior art. Those attacks by Nintendo failed.

Taking the '498 and 650 patents, a number of validity attacks by Nintendo failed, such as the attacks based on Sony and on the Philips Application prior art against the claims in their finally amended form. However, a good number of Nintendo's attacks succeeded. These included objections of added matter and some of the novelty and inventive step allegations relating to the wider claims in the granted forms of these patents. The outcome was that the Wii console infringes valid claims in the '498 and '650 patents and accordingly relief has been granted today in Philips' favour.

CPR Part 44 r44.2(2) provides that “(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but (b) the court may make a different order”. Moreover r44.2(4) and (5) provide that:

It is quite clear that the first question the court has to decide is who is the overall winner in these proceedings. It is common ground, rightly, that the overall commercial winner of these proceedings is Philips. That is an important starting point for considering costs.

Mr. Hinchliffe for Philips submits that I should follow the approach in SmithKlineBeecham v Apotex[2005] FSR 24 and make a percentage costs order. That principle is not in dispute. He contends that I should order Nintendo to pay Philips 90% of their costs. The reason the figure is 90% is because Philips submit that the overall costs should be in their favour because they won and that the only deduction should relate to World Class Track Meet. That accounts for approximately 5% of the costs and should be reflected by a deduction of 10% on the very broad brush basis that not only should Philips not recover its costs in relation to World Class Track Meet but that they should notionally pay Nintendo's costs, leading therefore to a deduction of a further 5%.

These percentages can be criticised in detail. For example the actual costs of the parties are distinct. Nintendo's costs are higher in some ways than those of Philips.

Nintendo, on the other hand, submit that I should take a different approach which comes to a percentage figure of about 62% of Philips’ costs. Nintendo submit that I should arrive at that because about 29% of Nintendo's costs are the costs which should be awarded to Nintendo in these proceedings. This figure represent the amount by which the costs were increased by the presence of the '484 patent in these proceedings. That is arrived at mainly by allocating to the 484 patent one third of the time spent by members of the legal team whose time was not specific to any particular patent, on the footing that there were three patents in issue. Then other deductions are made which are explained in Ms. Ragendra's witness statement and one gets to a figure of 29%. It is submitted I should therefore reduce the sum being paid by Nintendo to Philips by that fraction. I am to carry this out using a percentage because by taking that approach it does not matter that one side’s actual costs are larger than the others. Then I should deduct a further sum based on the cost of World Class Track Meet, which ultimately is calculated at 9%, (although the maths in my head does not quite work). Then a further 7% is taken into account as well, and it all comes ultimately to very close to 62%.

Both parties' calculations are capable of leading to difficulty. The approach of the court has to be fair but a percentage order is very difficult to apply on anything other than quite a rough and ready basis. It is impossible to achieve precision in these cases. One also has to bear in mind the very large sums of money involved. 1% of either party’s costs is a substantial sum of money. On the other hand, it is very difficult, not to say impossible, to come to anything other than a broad brush figure in cases of this kind.

Although it is true as both parties agree that Philips is the overall commercial winner and therefore the fundamental costs order should reflect that, the flaw in Philips’s approach is that to adopt it involves the court ignoring the fact that a very significant part of this action related to the '484 patent. That was a case which Philips brought and lost. The 484 patent was a freestanding patent in these proceedings. Although both patents are dealt with in one trial, the technology really does not overlap very much and it was handled separately. An order which gave Philips 90% of the costs of the proceedings does not seem to me to properly and fairly reflect that fundamental point.

On the other hand, to take the approach advanced by Nintendo seems to me to unduly elevate the significance of what are truly very rough percentage estimates of the attribution of time spent and costs incurred on particular issues. It gives those percentages a spurious level of accuracy which they simply do not deserve.

What I propose to do is as follows. I will award Philips two thirds of their costs of this case. The reason I do that is to reflect the fact that about one third of the costs of this action related to the '484 patent.

I recognise that one could look at this in more detail and try and take World Class Track Meet separately. But if I look at World Class Track Meet in relation to the '484 patent, I should also look into the detail of the '498 and '650 patents. To take an approach which focuses on World Class Track Meet in relation to '484 but ignores the fact that in detail Nintendo actually achieved a significant measure of success in relation to the '498 patent, even though they ultimately lost, is inconsistent.

The right way to approach the costs in this case is at a higher level of generality than either party has approached the matter. That is why I will award Philips two thirds of their costs. That represents a fair and realistic level of generality in these proceedings.