Fontem Holdings 1BV & Anor v Ten Motives Ltd & Ors

It is in this case unnecessary to distinguish between individual parties on one side of the record. I will simply refer to them as “Fontem”, “10 Motives” and “Nicocigs” respectively. On 21^st July 2015 I dismissed applications by 10 Motives (a) for defendants’ summary judgment and (b) in the alternative, for a stay of Fontem’s claim, and I dealt with an application for consequential directions by Nicocigs in their action. I said I would give full reasons in writing: that is the purpose of this judgment.

The patent in suit is European Patent (UK) No. 2 022 349 B1 (“the Patent”). It concerns the increasingly fashionable electronic cigarette. Such a device uses an atomiser to produce a vapour for inhalation as a substitute for the real smoke produced by a tobacco cigarette. The Patent teaches (amongst other things) an atomiser structure which improves its aerosol effects and atomising efficiency. Since the date of grant on 30 July 2014 Fontem has been the registered proprietor of the Patent. Fontem sells electronic cigarettes in the UK under the name PURITANE (and latterly also blu).

In Claim No. HP 2050 000011 Fontem seeks declaratory relief that 10 Motives’ rival products called “Cirro clearomisers” (there are four versions) and “V2 Rechargeables” (which together have about 35% of the UK market) infringe the Patent, an injunction to restrain further infringement and an enquiry as to damages in respect of each act of infringement (or in the alternative an account of profits). In its Defence 10 Motives alleges that the Patent is invalid, and further denies that the Cirro and V2 products infringe the Patent because there are material and distinguishing features differentiating them from any product described or claimed in any claim in the Patent.

Fontem has also commenced similar proceedings in England against two smaller market players (JT International SA and Zandera Limited, who together have about a 12% market share) in which substantially the same issues arise. Nicocigs (which also has about a 12% market share) has commenced its own proceedings (Claim No HP 2015 000027) for revocation of the Patent (relying on different grounds of invalidity) and for a declaration of non-infringement in relation to its own products, which go under the name of “Nicolites” and “Vivid E-Liquid”. Fontem has counterclaimed for infringement. Under existing case management directions, this action and those other two actions will be heard together at a single trial fixed to commence in early May 2016. The trial will be limited to questions of validity and infringement.

Fontem has also commenced proceedings in Germany against other manufacturers and suppliers of e-cigarettes, and in those proceedings obtained preliminary injunctions: these have in some cases led to settlement of the proceedings and the grant of licences by Fontem. Fontem has also commenced infringement proceedings in California against ten defendants, including the three largest e-cigarette businesses in the US, based on the equivalent US patent.

To complete the background, 10 Motives was one of those who filed a Notice of Opposition to the grant of the Patent at the EPO. Those Opposition proceedings are unlikely to conclude before 2019 and may take very much longer. In the meantime the e-cigarette market is expanding rapidly (the UK market grew by 340% in 2013, and year-on-year sales growth in the supermarket sector was 49.5% in 2014); and e-cigarette manufacturers and suppliers are being acquired by international tobacco companies. Already Fontem is ultimately owned by Imperial Tobacco Group plc, and Nicocigs by Philip Morris International Inc.

It is common ground that for the purposes of these applications I need look only at Claim 1 in the Patent (because all other claims are dependent upon it).

The introductory part of the Patent explains (in paragraph [0006]) that electronic cigarettes then available did not provide the ideal aerosol effects, and their atomising efficiency was not high, and (at paragraph [0008]) that to overcome these and other disadvantages the invention had been designed to provide an aerosol electronic cigarette that substituted for cigarettes. The consistory clause (at paragraph [0009]) states:-

“The purpose of this invention is fulfilled with an aerosol electronic cigarette comprising a battery assembly, an atomiser assembly, a liquid storage component and a hollow shell having one or more through-air-inlets. The battery assembly connects electrically with the atomiser assembly, and both are located in the shell. The atomiser assembly includes a porous component and a heating body in the form of a heating wire. The atomiser assembly includes a support member having a run-through hole. The porous component is mounted on the support member and is wound with the heating wire in a part that is on the side in the axial direction of the run-through hole. The liquid storage component fits with the porous component of the atomiser assembly and is located in one end of the shell which is detachable”

In the pre-characterising part of the Patent it is explained (at paragraph [0032]) that

“This invention will bring the following benefits…..(2) For this invention, the battery assembly and atomiser assembly are directly installed inside the shell, and then connected with the cigarette bottle assembly. That is, there is just one connection between two parts, resulting in a very simple structure. For use or change, you just need to plug the cigarette holder into the shell, providing great convenience. When the nicotine liquid in the cigarette bottle assembly is used up or the cigarette bottle assembly is damaged and needs to be changed, the operation will be extremely easy.”

In the specific embodiment described in the Patent at paragraph [0035] it is said that

“…this patent provides an aerosol electronic cigarette, which includes a battery assembly, an atomiser assembly and a cigarette bottle assembly, and also includes a shell (a) which is hollow and integrally formed. The battery assembly connects with the atomiser assembly and both are located in the shell. The cigarette bottle assembly is located in one end of the shell, which is detachable. The cigarette bottle assembly fits with the atomiser assembly. The shell has through-air-inlets.”

Claim 1 is then expressed in these terms (with agreed integers inserted):-

“[1] An aerosol electronic cigarette comprising

1.1

a battery assembly,

1.2

an atomizer assembly,

1.3

a liquid storage component (9) and

1.4

a hollow shell (a,b) having one or more through-air-inlets (a,1);

[2] wherein the battery assembly connects electrically with the atomizer assembly, and both are located in the shell (a,b);

[3] the atomizer assembly includes a porous component (81) and a heating body in the form of heating wire (83);

characterised in that:

[4] the atomizer assembly includes a support member (82) having a run-through hole (821);

[5] the porous component (81) is mounted on the support member (82) and is wound with the heating wire (83) in a part that is on the side in the axial direction of the run-through hole (821); and

[6] the liquid storage component

6.1

fits with the porous component of the atomiser assembly and

6.2

is located in one end of the shell (b) which is detachable.”

The designations in Claim 1 appear on the figures below:-

In its summary judgment application 10 Motives argues that on a comparison of its products with the Patent properly construed the Court can be satisfied that Fontem has no real prospect of succeeding in its infringement claim.

The principles upon which the jurisdiction conferred by CPR 24 is applied are settled, and it may be taken that I have them (and particularly the summary of them by Lewison J in Easy Air Limited v Opal Telecom Ltd [2009] EWHC 339 at para. [15]) well in mind. As Lewison J said:-

“ ..it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it.”

The application of these principles in the context of patent claims was examined in Nampak Plastics Europe Ltd v Alpla UK Ltd [2014] EWCA Civ 1293. Noting that (as explained by Lewison J) the existence of an issue of construction of a patent did not automatically render it unsuitable for summary judgment, Floyd LJ said (at para.[9] following):-

“However it is necessary to proceed with caution given that the court is not being called upon, when construing a patent, to decide what the words of the patent mean to it, but what they would have been understood to mean by the person skilled in the art. Such an exercise is dependent upon the identity of the person skilled in the art and the knowledge and assumptions which one attributes to him or her… That said, it remains the law that expert evidence is not admitted as to the meaning of ordinary English words which have no special or technical meaning in the art…. It follows from what I have said that, on a summary judgment application … it is necessary for a party who claims that the court is inadequately equipped to decide an issue of construction to identify, perhaps in only quite general terms, the nature of the evidence of the common general knowledge which he proposes to adduce, and to be in a position to explain why that evidence might reasonably be expected to have an impact on the issue of construction.”

The point of producing such evidence is to disable 10 Motives from demonstrating to the Court that there is an absence of reality about Fontem’s case.

I have been reminded of (and will seek to apply) the principles of claim construction set out in Virgin Atlantic Airways Ltd v Premium Aircraft Interiors UK Limited [2009] EWCA Civ 1062. In particular I bear in mind that claims are to be construed purposively i.e. by reference to the inventor’s purpose as disclosed by the description and drawings, and that indeed “purpose is vital to the construction of claims” though it is not “the be-all and end-all”: but that it must be remembered that an inventor may have several purposes depending on the level of generality of his invention.

I also have in mind the guidance given by Floyd J in Nokia GmbH v IPCOM GmbH [2009] EWHC 3482 (Pat) at paragraph [41] where he said:-

“Where a patentee has used general language in a claim, but has described the invention by reference to a specific embodiment, it is not normally legitimate to write limitations into the claim corresponding to details of the specific embodiment, if the patentee has chosen not to do so. Specific embodiments are merely examples of what is claimed as the invention …”

In considering this summary judgment application certain contextual matters can be left out of account:-

The Cirro products do not resemble cigarettes but look like electronic appliances. There is a black shaped mouthpiece (“the cap”) attached to (but separable from) a clear cylinder (called “the clearomiser”) containing liquid, wicks and a heating element into which is screwed a detachable rigid black cylinder comprising the switch and the rechargeable battery. The cap may be detached, the clear cylinder filled with a volatile liquid, the cylinder closed by replacing the cap, the battery assembly then attached, and when the device is switched on liquid is drawn by capillary action up into the wick where it is volatilised, so that when the user sucks on the mouthpiece the vapour (mixed with air drawn through airways) provides the “vaping” experience.

The V2 Rechargeable does look like a cigarette. It consists of two sub-assemblies. There is a white barrel which contains the battery assembly. There is a brown barrel (called “the cartomiser”) which screws onto the battery assembly and which contains porous wadding (which holds the volatile liquid) and a very fine heating coil. There is a tube running along the axis of the “cartomiser” which supplies air and volatilised liquid to a hole at the end. The “cartomiser” is effectively a disposable cartridge: when the liquid is depleted it (still containing the atomiser) is thrown away and a fresh one attached.

Mr Alastair Wilson QC submitted:-

As to the detachability point 10 Motives argued that the “purpose” of the Patent was explained in paragraph [0032]: the inventor was trying to secure the advantage of an easily disconnected liquid storage component:-

“….there is just one connection between two parts, resulting in a very simple structure. For use or change, you need to plug the cigarette holder into the shell, providing great convenience. When the nicotine liquid in the cigarette bottle assembly is used up or the cigarette bottle assembly is damaged and needs to be changed, the operation will be extremely easy.”

It was suggested that in the light of that purpose the person skilled in the art would understand how crucial were the words at integer [6] of the claim that “[the liquid storage component] fits with the porous component of the atomizer assembly and is located in one end of the shell (b) which is detachable”. “Detachable” is an ordinary English word. The liquid storage component has to be “detachable” from the atomiser, and this is a feature of the whole invention (not merely of a specific embodiment). In order to achieve the advantage claimed in paragraph [0032] the shell and its liquid storage component has to be “detachable” from the whole of the rest of the device including the atomiser. In the Cirro and the V2 the liquid storage component is not detachable from the atomiser.

Mr Alastair Wilson QC concedes that the issue is not quite as simple as that because at the start of Claim 1 there is a reference to the battery and the atomiser being “both…located in the shell (a,b)”, so that the atomiser might be contained in part (b). On this reading the claim would cover structures in which the liquid storage component would be “located at one end of the shell (b)” and the atomiser also located in “the shell (b)”, so that if “the shell (b)” was detachable it would be detachable from the battery assembly alone (with the consequence that the Cirro products would fall clearly within Claim 1 so construed).

But he submits that Claim 1 cannot sensibly be so construed because (i) it would not secure the advantage described in paragraph [0032]; and (ii) it could mean that the battery was also in “the shell (b)”, which would be a nonsense. He argues that the reference to “the shell (a,b)” is explicable (i) because if something like the atomiser is in “the shell (a)” (which it must be to secure the stated advantage) then logically it is also within “the shell (a,b)”; and (ii) the atomiser, though part of “the shell (a)”, might protrude into “the shell (b)” when assembled.

I am not satisfied that this is beyond realistic argument the correct construction of Claim 1. First, it seems to me well arguable that the Patent has more than one purpose, and that indeed its central inventive concept was directed to addressing the problems of the then current electronic cigarettes which did not provide ideal aerosol effects or achieve high atomising efficiency. It is in that context that the significance of what is contained in the detachable “shell (b)” has to be assessed by the skilled person, and an answer given to the question whether the patentee would limit his claim to the battery and atomiser being in the same part of the shell (“the shell (a)”) for no technical reason. That is a construction point.

Second, the hearing was conducted without the benefit of product descriptions or of the expert evidence that Fontem says it intends to lead as to the technical function of the various elements of Claim 1. I was shown samples of each of the allegedly infringing products and (to caricature some careful argument) effectively invited to say that they looked different from the drawings and descriptions in the Claim. So placed I cannot say that it is fanciful for Fontem to argue that the exact point of detachability of the one element of the device from the others is (to quote Jacob LJ in Virgin (supra) at para. [5] (x))

“ a technically trivial or minor difference between an element of the claim and the corresponding element of the alleged infringement [which] nonetheless falls within the meaning of the claim when read purposively.”

That is an evidential point.

As to “the liquid storage point” Mr Alastair Wilson QC argues that the description of the electronic cigarette as comprising “a battery assembly, an atomiser assembly, a liquid storage component (9) and a hollow shell (a,b)….characterised in that…. the liquid storage component fits with the porous component of the atomiser assembly and is located in… the shell (b)” demonstrates that that has to be a separate liquid storage component within the shell and which fits with the atomiser: and that a liquid-holding cavity formed by the outer walls of the shell (such as the clear part of the Cirro barrel containing the atomiser and volatile liquid) cannot infringe Claim 1.

It is in my judgment well arguable

For these reasons I declined to grant summary judgment in favour of 10 Motives.

I also declined to grant a stay of the 10 Motives action in the light of the EPO opposition proceedings (leaving the other two claims to proceed to trial in May 2016).

The principles to be applied in relation to such an application were recently considered by the Court of Appeal in IPCOM GmbH V HTC Europe Co Limited [2013] EWCA Civ 1496. The essential point to grasp is that the discretion to grant a stay must be exercised to achieve a balance of justice between the parties having regard to all the relevant circumstances of the particular case: and that is always the ultimate question. That said, if there are no other factors, a stay of national proceedings pending the determination of concurrent proceedings in the EPO concerning the validity of the patent is the default option.

Mr Alastair Wilson QC submitted that the default position did not produce injustice in the present case: and there were four other factors that favoured its adoption.

First, whilst he accepted there is likely to be substantial delay before the EPO proceedings are concluded, the fact that a trial will take place in May 2016 involving the same issues but between different parties would produce a degree of certainty in England (albeit not one that affected 10 Motives).

Second, if in the present proceedings there is final judgment in favour of Fontem before a decision on validity by the EPO favourable to 10 Motives, and damages are awarded, then there is no obvious means by which the English judgment could be overturned in the light of the EPO holding. He accepted, however, that this difficulty could be overcome if Fontem gave an undertaking in such an event to repay any damages awarded: indeed he drew attention to the observation of Floyd LJ in Adaptive Spectrum and Signal Alignment Inc v British Telecommunications plc [2013] EWCA Civ 1513 at [13] that it was

“now more or less inevitable that ASSIA (sic) would have.. to undertake, as the price of resisting … a stay, to repay (in the event of revocation or amendment) any financial relief subsequently obtained.”

Third, if in the present proceedings there is final judgment in favour of Fontem before a decision on validity by the EPO favourable to 10 Motives, and an injunction is granted, then there is no means of compensating 10 Motives for their loss of profits and damaged goodwill during the period the injunction was operative (what Mr Wilson QC called “the baleful effect of an injunction”). In the Adaptive case BT sought such an undertaking, but the Court of Appeal refused to require it to be given, saying (at para. [9]):-

“A cross-undertaking is appropriate to take account of the possibility that an earlier judgment is wrong (e.g. an interim injunction or an injunction pending appeal). In the present case, revocation by the EPO would not show our judgment to be wrong, or the injunction to have been wrongly granted. A subsequent EPO revocation or amendment would mean that the injunction would become ineffective or have to be discharged from the date of the revocation/amendment but not ab initio. There is no reason for ASSIA to pay for the harm during the period when the injunction was rightly granted.”

So whilst the party who obtains financial relief (including, presumably, damages in lieu of an injunction) will be required to give an undertaking covering the possibility of a different conclusion eventually being reached by the EPO, the party who obtains injunctive relief will not be required to give such an undertaking.

Fourth, if a stay of the present proceedings were to be granted but in due course the EPO decides that the Patent is valid, then the present proceedings can be revived and (if successful) 10 Motives can be ordered to pay damages in respect of (or to account for) all of its infringing trading over the years between the imposition of the stay and judgment in the restored action, and Fontem would be thereby protected.

But there are other factors to take into account.

First, a stay is likely to be lengthy: and for the duration of the stay Fontem will be unable to assert its rights against 10 Motives. The longer the stay the greater the financial compensation eventually due from 10 Motives (adopting the scenario outlined in paragraph [35] above), the longer 10 Motives will have had to deal with the proceeds of its infringing trading, and the lower the prospect of full recovery for Fontem. Getting to a stage at which some financial compensation is payable (even if it has to be subject to an undertaking to return it if the Patent is subsequently held invalid) shares the risks more evenly.

Second, the market for e-cigarettes is dynamic and developing very rapidly. As Fontem asserts (and it puts its money where its mouth is) the major participants are using what it says is its patented technology. The Patent may contain the key intellectual property concerning atomisers. It is desirable to achieve as much commercial certainty as possible for as many market participants as possible at as early a date as possible.

Third, the contest at the moment is all about establishing market share for particular brands. Once a brand establishes a market share (even with an infringing product) it can introduce all sorts of new products. To preserve for 10 Motives a 35% share of the UK market by virtue of its having filed Notice of Opposition at the EPO whilst the other market participants fight similar (but not absolutely identical) issues out with Fontem in May 2016 would distort the market hugely.

Fourth, in a rapidly developing market (i) the financial consequences of any wrongdoing should be assessed sooner rather than later (because the more delayed the exercise the harder it becomes to disentangle the consequences of wrongdoing from market changes); and (ii) the more important it is to test whether 10 Motives’ products infringe (because if they do not then 10 Motives can compete fully and may decide to abandon the Opposition proceedings).

Fifth, the very existence of active proceedings in which determinations are being made is conducive of settlements (as the German proceedings demonstrate).

Sixth, the continuation of the present proceedings against 10 Motives is unlikely to generate significant wasted costs (and under an existing order 10 Motives is already afforded protection) since the construction questions have to be teased out and addressed in any event. In this case, as in many others, whilst account must be taken of the risk of wasted costs, that has to be weighed against the advantages secured by the examination and resolution (albeit not final in every case) of the issues in the claim.

When according weight to these various factors and deciding the outcome it is important to bear in mind that this present hearing is not the only opportunity that 10 Motives will have to seek a stay upon further proceeding with the action. If there is to be a stay then it all depends when that stay “bites”.

It would be perfectly possible for the construction and infringement issues as between Fontem and 10 Motives to be decided in May 2016, but for the question of the relief to be afforded in the light of the outcome of those issues to be addressed at a subsequent hearing. If 10 Motives’ products do not infringe, there is no problem. If 10 Motives’ products do infringe, then Fontem will only get financial compensation on the footing that it offers an undertaking to repay if the Patent is invalid. If Fontem wants an injunction then it may decide to seek such only on the footing that it volunteers that which it could not be compelled to give viz. an undertaking to pay compensation (perhaps even a liquidated sum) to 10 Motives in the event that 10 Motives’ opposition is successful, inviting the Court to take that into account when the Court comes to exercise its discretion whether to grant an injunction or award damages in lieu. On that occasion 10 Motives could seek a stay of further proceedings in the action because of the “baleful effect” of an injunction (even on the terms Fontem sought it). (I think the recent judgment of the Court of Appeal in Smith & Nephew v ConvaTec [2015] EWCA 803 clearly indicates that a nuanced view has to be taken of questions of stay of final injunctions pending determinations in the EPO, and supports the views I canvassed at the hearing).

Weighing the competing considerations it seemed to me clear that a stay ought now to be refused (but without prejudice to the ability of 10 Motives to make a further application immediately before questions of relief are to be determined): and the action will proceed to be heard with the other two actions in May 2016.

I express my thanks for the clarity and concision of the arguments addressed.