Global Flood Defence Systems Ltd & Anor v Johan Van Den Noort Beheer BV & Ors

These appeals from orders of His Honour Judge Hacon sitting in the Intellectual Property Enterprise Court raise two difficult issues in the law of groundless threats of patent infringement proceedings. The first issue is whether, if one person (A) threatens another person (B) with proceedings for infringement of a granted patent at a time when A only has a pending patent application, it is open to A to attempt to justify that threat once the patent has been granted. If the answer is that A can seek to justify the threat, the second issue is what to do about the timing of the trial of the issue of justification.

The reason why these issues arise is that it is commonplace for a period of some years to elapse between the date on which a patent is applied for and the date on which the patent is granted. In the United Kingdom, the proprietor cannot bring proceedings for infringement unless and until the patent has been granted. Once the patent has been granted, however, the proprietor can retrospectively claim relief dating back to the date of publication of the application (subject to questions of limitation).

The Second Defendant (“Mr van den Noort”) is the inventor of a product called a self-closing flood barrier (“the SCFB”). Mr van den Noort is owner and managing director of the First Defendant (“BV”). On 13 May 2008 BV filed a patent application in respect of the SCFB in the Netherlands. On 2 April 2009 BV filed an international patent application under the Patent Cooperation Treaty claiming priority from the Dutch patent application which was published under number WO 2009/13922 on 19 November 2009. The international application entered the regional phase in December 2010. On 14 May 2011 it was published as European Patent Application No. 2 315 880 designating many Contracting States of the European Patent Convention, including the United Kingdom (“the Application”).

In November 2010 BV and the First Claimant (“Global Flood”) entered into a licence agreement (“the Licence”). Global Flood was jointly owned by Mr van den Noort and the owners of the Second Claimant. Under the Licence, Global Flood was exclusively licensed under the Application inter alia to make and distribute the SCFB. For a little over three years the Claimants manufactured and supplied SCFBs under the Licence. In December 2013 the commercial relationship broke down. The Licence was terminated in either January or February 2014. Thereafter the Claimants stopped selling the SCFB and started selling an alternative product called a self-activating flood barrier.

In February and March 2014 Mr van den Noort and BV made certain threats of patent infringement proceedings. These were contained in three notices posted on BV’s website on 17 February 2014, 4 March 2014 and 7 March 2014 and in a letter to Sir Peter Luff MP dated 3 March 2014. For present purposes, it is sufficient to refer to the second website notice, which included the following passage:

Mr van den Noort and BV accept the judge’s finding that these were threats of imminent proceedings for infringement of a granted patent. They also accept that the Claimants are aggrieved by the threats.

On 6 May 2014 the Claimants started proceedings against BV, Mr van den Noort and the Third Defendant for groundless threats. The claim against the Third Defendant was settled at an early stage. Accordingly, in the remainder of this judgment I shall refer to BV and Mr van den Noort as “the Defendants”. The Defendants counterclaimed for royalties due from Global Flood under the Licence and for a declaration that a trade mark was invalid. The Claimants then amended their claim to add an allegation of misrepresentation.

On 17 October 2014 the Claimants applied for summary judgment in respect of their claim for threats against the Defendants. This application was heard on 21 January 2015. The Claimants’ main argument in support of the application for summary judgment was that, as matter of law, the threats could not be justified because they were threats of proceedings for infringement of a granted patent whereas the Application had not been granted. In a reserved judgment handed down on 29 January 2015 ([2015] EWHC 153 (IPEC)) the judge rejected this argument.

After the handing down of the judgment, there was a case management conference. The judge granted the Claimants an interim injunction restraining the Defendants until judgment from threatening any person with proceedings for patent infringement where the Claimants were aggrieved by such threats. He also gave directions for the conduct of the proceedings, and fixed the trial for 8 and 9 December 2015, which was the next available slot for a two-day trial in the IPEC diary. Among the directions he made was one for a further case management conference in October 2015.

Although the judge granted the Claimants permission to appeal against the dismissal of their summary judgment application on the ground that the threats were incapable of justification, the Claimants did not at that stage pursue the appeal because they thought it unlikely that the Application would be granted by the trial. BV requested the European Patent Office to expedite the processing of the Application, however.

The second case management conference was held on 5 October 2015. The Defendants applied to adjourn the trial of the threats claim in order to allow time for the Patent to be granted. The judge declined to adjourn the trial of the threats claim for the reasons discussed below.

On 19 November 2015 the EPO issued a decision to grant the Application. This meant that the form of the claims was fixed, and the patent would be granted in that form on 16 December 2015. European Patent No. 2 315 880 (“the Patent”) was duly granted on 16 December 2015. I was informed that since then the Claimants have commenced opposition proceedings in respect of the Patent in the EPO.

At the start of the trial on 8 December 2015, the Defendants renewed their application for the trial of the threats claim to be adjourned. The judge acceded to this application for the reasons he subsequently gave in a reserved judgment handed down on 1 February 2016 ([2016] EWHC 99 (IPEC)). That judgment also dealt with the aspects of the trial that went ahead, which are not relevant for present purposes.

In the order he made following the handing down of his second judgment, the judge gave directions for the trial of the threats claim, including permitting the Defendants to re-amend their Defence and Counterclaim to include “any additional defences which such Defendants may wish to rely upon in the light of the fact that European Patent No. 2315880 has been granted”. The judge refused the Claimants permission to appeal against the decision to adjourn the trial.

On 11 April 2016 Warren J granted the Claimants an extension of time for filing an appellants’ notice to pursue the appeal against the dismissal of their summary judgment permission for which had been granted by the judge, and granted the Claimants permission to appeal against the judge’s order adjourning the trial. In the light of this order the parties agreed a stay of the threats claim until the appeals had been determined.

Section 69 of the Patents Act 1977, which is headed “Infringement of rights conferred by publication of application”, provides, so far as relevant:

Section 70, which is headed “Remedy for groundless threats of infringement proceedings”, provides, so far as relevant:

The Claimants contend that, on the true construction of section 70, a threat of proceedings for infringement of a granted patent made at a time when the person making the threat only has a pending patent application is incapable of justification under section 70(2A). The Defendants contend that the judge was right to reject this argument.

There is no direct authority on this issue. The closest is Brain v Ingledew Brown Bennison & Garrett. That case primarily involved the following threat:

The plaintiff brought proceedings in respect of the threat. The defendants applied to strike out the claim as disclosing no reasonable cause of action. The defendants argued inter alia that the threat was a threat in respect of a pending published application, and that such threats were not actionable. This argument had two main strands. The first concerned the difference in wording between section 69(1) and section 70(2). (This was prior to the amendment of section 70 by the Patents Act 2004 to replace what was then subsection (2) with the current (2) and (2A), but the changes are not material for present purposes.) The second strand concerned the history of the legislation, and in particular the omission of the words “or of rights arising from the publication of a complete specification” which appeared in section 65(2) of the Patents Act 1949 from section 70(2) of the 1977 Act.

Jacob J rejected this argument for the following reasons ([1995] FSR 552 at 556):

For good measure, Jacob J went on at 556-557 to hold that the threat in question was not merely a conditional threat of proceedings to claim relief under section 69, but also a conditional threat of proceedings to claim conventional relief for patent infringement (in particular, an injunction) which was not caught by the defendants’ argument.

Both parties appealed against different aspects of Jacob J’s decision. On the appeal, the defendants did not challenge his conclusion that the threat fell within the scope of section 70(1) and was therefore actionable. Nevertheless, Aldous LJ indicated both that he agreed with Jacob J’s reasoning in the first paragraph I have quoted and that he considered that a threat made prior to grant would be understood as a threat to bring proceedings after grant ([1996] FSR 341 at 347-348).

The plaintiff challenged Jacob J’s conclusion that it was open to the defendant to justify the threat under section 70(2). The plaintiff argued that it was not practical to read section 70(2) in that way, because only when the patent was granted would it be possible for the court to decide whether acts in question infringed both the granted claims and the published claims, as required by section 69(2).

Aldous LJ rejected this argument for the following reasons (at 348):

Hobhouse LJ expressed reservations about the last sentence of this passage, saying (at page 355):

Counsel for the Claimants submitted that the present case was distinguishable from Brain, because it was concerned with a threat to bring imminent proceedings for patent infringement at a time when the person making the threat could not bring such proceedings because he only had a patent application, whereas Brain concerned a contingent threat to bring proceedings for patent infringement (whether for conventional relief or relief under section 69) if and when the patent was granted. I accept that the two cases are distinguishable, but it does not necessarily follow that the reasoning in Brain is of no assistance.

As is common ground, the resolution of the issue in the present case depends on the construction of section 70(2A). This provides a defence of justification (subject to questions of validity) where the defendant proves that “the acts in respect of which proceedings were threatened constitute or, if done, would constitute an infringement of a patent”.

Counsel for the Claimants argued that the acts in respect of which proceedings were threatened in this case could not be acts which would constitute an infringement of a patent if done because, at the time they were or would be done (i.e. at or shortly after the time the threats were made), at best they could only be acts which gave rights under section 69 of the Act.

He also argued that this interpretation was supported by three further considerations. First, it had the benefit of certainty. A threat to sue for infringement of a patent, when no patent had been granted, would be an unlawful threat. By contrast, an approach which allowed subsequent justification created uncertainty, since the lawfulness of the threat could not be determined at the time or shortly after the threat is made. Secondly, there was no legitimate reason why a person should wish to make a threat to sue for infringement of a patent, when there was no granted patent on which to sue at the time of the threat. There was therefore no reason to interpret the law in a way which allowed justification of such threats. Thirdly, an approach which permitted subsequent justification would lead to a situation whereby the lawfulness or otherwise of the threat depended upon the date of the trial, which would depend upon the availability of court resources and a number of other matters rather than on the nature of the threat made.

Counsel for the Defendants argued that the fallacy in the Claimants’ argument was that it read into section 70(2A) a requirement that the actual threat made be justified, whereas there was no such requirement in the section. Section 70(2A) only required that the particular acts complained of in the threat were shown to constitute an infringement of a patent. Thus the statutory test directed the court to look to the nature of the acts which were the subject of the threat and to ask if they were or would be an infringement of a patent. It did not ask the court to assess whether the claimant’s actions were or would be the particular infringement asserted in the threat. The words of an alleged threat were therefore only relevant to determining whether or not it was a threat to bring patent proceedings, and if so to identifying the acts that would be the subject of those proceedings. Thus, if a party threatened proceedings for infringement of a particular patent, but it transpired that the acts identified in the threat did not infringe that patent, but infringed a different patent owned by the person making the threat, that would meet the requirements of section 70(2A).

He also argued that this interpretation was supported by two further considerations. First, the policy behind section 70 was to penalise persons who caused commercial damage by making threats of patent infringement proceedings where such threats were unjustified, but such threats were not unjustified if the person making the threat was able to obtain relief under section 69. Secondly, the Claimants’ real complaint was that the communications in question contained false statements (namely that BV had a granted patent covering the UK and had already commenced proceedings for infringement against the Claimants), but the remedy for that complaint was to bring a claim for malicious falsehood.

In my judgment the judge was correct to hold that the threats in the present case were capable of justification under section 70(2A). My reasons are as follows.

First, section 70 creates a tort of strict liability which does not require proof of actual damage in order to be actionable. Furthermore, it acts as a restraint upon commercial freedom of speech. Still further, it represents an obstacle to the negotiation and settlement of patent disputes without resorting to infringement proceedings. Accordingly, the court should be slow to conclude that section 70 makes a class of threats incapable of justification in the absence of clear wording to that effect.

Secondly, the vice at which section 70 is aimed is the damage which can be caused to a manufacturer or importer of goods by threats of patent infringement proceedings directed at its customers. Nevertheless it is clear from section 70(2A) that it is lawful to make such threats where they are justified. In considering whether a threat is justified, what matters is whether the person making the threat is ultimately able to obtain relief in respect of the acts in question.

Thirdly, as counsel for the Defendants submitted, section 70(2A) requires the court to consider whether the acts in respect of which proceedings were threatened constitute an infringement, not whether the terms of the threat were justified. Counsel for the Claimants did not challenge the proposition that a threat of proceedings for infringement of one patent could be justified by proving that the acts in respect of which the threat was made infringed another patent. Instead, counsel for the Claimants submitted that he did not need to go that far, because a threat to sue on a granted patent when there was no granted patent was different, and more difficult to bring within the language of section 70(2A). I accept those points, but in my view they do not detract from the force of the submission made by counsel for the Defendants.

Fourthly, for the three reasons given above, the availability of the defence of justification should not depend on the precise manner in which the threat was expressed, and in particular whether the author of the threat took sufficient care to distinguish between the rights presently conferred by a granted patent and the contingent rights conferred by a patent application if and when it proceeded to grant. In this regard, it should be borne in mind that, as in the present case, proceedings for groundless threats often arise out of incautious statements made by persons who are not lawyers and who have not taken specialist legal advice (and, increasingly often, come from a country whose law with respect to threats of patent infringement proceedings differs from that of the UK).

Fifthly, I consider that the words of section 70(2A) are open to the interpretation placed upon them by the Defendants and do not compel the Claimants’ interpretation. As Aldous LJ pointed out in Brain, in order to be an infringement, the acts must fall within section 60. As section 69(1) requires, that section must be read together with section 69. It follows that the reference in section 70(2A) to acts which “constitute ... an infringement of a patent” are capable of being understood as extending to infringement of the rights conferred by a patent pursuant to section 69.

Lastly, I consider that the most powerful points made by counsel for the Claimants concern the need for certainty and the difficulty that will arise if the patent is not granted by the date of trial. But the force of these points should not be overstated. In any case where the person making the threat seeks to justify it, there may need to be a trial of issues of infringement and/or validity. Thus there can in any event be considerable uncertainty until the court determines these questions. Furthermore, in the event of an appeal, that uncertainty will extend until the decision of the Court of Appeal. Still further, it should be borne in mind that, where the patent (application) in question is a European patent (application), the patent may be subject to opposition proceedings in the EPO which can last for many years. The decisions taken in such opposition proceedings can have the effect of reversing earlier decisions of the domestic courts at least unless damages have been paid (see Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, [2014] AC 160). In these circumstances the uncertainty can last a long time. The additional potential uncertainty if grant of the patent is still awaited at the date of the threat may be undesirable, but it does not greatly alter the position. As for the point that the availability of a defence should not depend on the trial date, I agree that this is a genuine concern, but for the reasons explained below I do not consider that the problem is insoluble.

The judge’s decision to adjourn the trial was a case management decision. Accordingly, counsel for the Claimants accepted that he had to show that the judge had erred in principle in exercising his discretion in order to succeed on this appeal.

In exercising his discretion the judge was guided by the judgment of Laddie J in Brain v Ingledew Brown Bennison & Garrett (No 2) [1997] FSR 271. Following the decision of the Court of Appeal, the plaintiff asked for particulars of the claims of the patent which were alleged to have been infringed and of the acts alleged to infringe those claims. The defendants’ response was that they could not give the particulars requested because they did not know if the patent would be granted or, if so, what the scope of the granted claims would be, and in those circumstances they could not specify what particular acts were alleged to infringe either. The plaintiff then applied to strike out the defence of justification. This application was heard in October 1996 when the trial had already been fixed for February 1997.

Laddie J noted the difference between Aldous LJ and Hobhouse LJ in the Court of Appeal on this question. He went on (at 275-276, emphasis in the original):

Laddie J went on to accede to the plaintiff’s application, because the plaintiff would not know what case it had to meet if the requested particulars were not given, but the defendants acknowledged that they were unable to give those particulars.

While I do not question Laddie J’s decision in the circumstances of that case, it seems to me that the last paragraph of the passage I have quoted from his judgment omits a significant consideration, which is the availability of an interim injunction. It is common in threats cases for the claimant to seek and obtain an interim injunction to restrain the making of further threats pending trial. If the claimant is protected by an interim injunction in the meantime, then in most cases it should not be prejudiced by a delay in the trial of the issue of justification until the patent is granted. I recognise, of course, that the claimant must give a cross-undertaking in damages in order to obtain an interim injunction. While in principle the claimant will not want to be exposed to potential liability under the cross-undertaking for an open-ended period, in most cases it is difficult to see what recoverable loss the defendant will have sustained through being wrongly restrained from making threats because the threats turn out to have been justified. There may be cases where the defendant is able to show that it has suffered loss in the form of the costs of having to issue proceedings against other parties which would otherwise have been unnecessary, but this will not be possible if the patent has not yet been granted.

Returning to the present case, the judge’s reasoning may be summarised as follows. He began by noting that, at the hearing on 29 January 2015, it was recognised that it was unclear whether or not the Application would be granted by the trial date of 8-9 December 2015, and it was for that very reason that provision was made in the order for a second case management conference in October 2015. By then, as the judge put it at [13], “it was hoped, the status or progress of Application 2315880 would be clear and the directions for trial could be adjusted appropriately”.

He then described the position at the hearing on 5 October 2015 as follows (at [15]):

Having noted that the Defendants’ optimism had been vindicated, in that the decision to grant was issued on 19 November 2015 with grant to follow on 16 December 2015, he proceeded to consider and reject two submissions advanced by counsel for the Claimants. The primary submission was that, if the patent had not been granted by the date fixed for trial, that was the end of the matter because the threats could not be justified. The secondary submission was that no adjournment should be granted in the exercise of the court’s discretion having regard to three factors relied on by the Claimants: first, that the Defendants had not prosecuted the Application with due diligence; secondly, that an adjournment would lead to a delay in resolving proceedings commenced in May 2014; and thirdly, that the Defendants had made a further threat since the grant of the interim injunction in a letter dated 12 October 2015.

The judge’s reasons for rejecting the primary submission were that Laddie J had recognised in Brain (No 2) that there could be cases in which a short stay would be appropriate because grant of the patent was imminent, and that this was a case where the grant was imminent. Accordingly, subject to any countervailing considerations, a stay should be granted.

The judge’s reasons for rejecting the secondary submission were as follows. Whether the Defendants had prosecuted the Application with due diligence was irrelevant, but in event the Defendants had sought expedition. A delay in the resolution of the proceedings was not ideal, but it was not the Defendants’ fault and the Claimants were protected by an interim injunction. He did not consider that the letter dated 12 October 2015 was an actionable threat, but in event it did not alter his view that the Defendants should be given the opportunity to justify their threats.

On the appeal, counsel for the Claimants submitted that the judge had erred in principle because nothing had changed since 29 January 2015 when the trial date was set. It was known at that time that the patent might not be granted by 8-9 December 2015, and yet the trial had still been fixed for that date. Moreover, the trial had rightly been fixed for that date since that was the date which would ordinarily be allocated to this case and the Defendants had taken the risk that the patent would not be granted by the trial date when they made the threats. All that had happened subsequently was that the possibility that the patent would not be granted by the trial date had come to pass.

I accept the premise of this argument, but not the conclusion which the Claimants seek to draw from it. As the judge explained, it was because the position regarding the grant of the patent was uncertain that provision was made in the order of 29 January 2015 for a second case management conference. The purpose of doing so was to enable the trial directions to be adjusted if appropriate. Plainly, that could have included adjourning the trial of the threats claim. In the event, no decision was taken at the hearing on 5 October 2015. Rather, it was agreed to wait and see if the Defendants were right that a decision to grant would be issued soon. In the event, they were right. Thus, by the trial date, the claims were fixed and grant was imminent. In my view this is precisely the kind of circumstance for which the judge had attempted to make allowance on 29 January 2015.

Accordingly, I do not consider that the judge made any error of principle. On the contrary, his decision was well within the ambit of his discretion. Indeed, I entirely agree with it. Given that the grant of the patent was imminent, an adjournment was fully justified. Otherwise, the consequence would be that the Claimants won the threats claim by default even though the Defendants would shortly be in a position to attempt to justify the threats.

Both appeals are dismissed.