“Should I stay or should I go”? – court of appeal decision in IPCom GmbH & Co Kg v HTC Europe Co Ltd & Others

29/11/2013

Earlier this year in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, the Supreme Court invited the lower courts to reconsider the guidance given in Glaxo Group v Genentech [2008] EWCA Civ 23 concerning the circumstances in which it is appropriate for a UK court considering combined patent infringement and revocation proceedings to grant a stay of the UK proceedings pending the outcome of co-pending opposition proceedings before the European Patent Office (EPO).

The Court of Appeal has responded to this invitation in a judgment issued on 21st November 2013 in IPCom GmbH & Co Kg v HTC Europe Co Ltd & Others [2013] EWCA Civ 1496. This Appeal was heard on 29th October 2013 and concerns a decision of Mr. Justice Roth in the Patents Court, declining to order a stay of the trial of technical issues in an action relating to the infringement and validity of an EP (UK) patent.

In declining HTC’s application for a stay until a final decision in the co-pending opposition proceedings before the EPO, Mr. Justice Roth relied on the nine guidelines given by the Court of Appeal in Glaxo Group v Genentech [2008] EWCA Civ 23, which set out the factors the Patents Court should consider when exercising its discretion to grant a stay.

The Court of Appeal affirmed Mr. Justice Roth’s decision. However, in light of the observations made by the Supreme Court in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, Lord Justice Floyd, giving the lead judgment for the Court of Appeal, recast the previous nine guidelines into the following thirteen guidelines:

1. “The discretion, which is very wide indeed, should be exercised to achieve the balance of justice between the parties having regard to all the relevant circumstances of the particular case.”
2. The discretion is of the Patents Court, not of the Court of Appeal. The Court of Appeal would not be justified in interfering with a first instance decision that accords with legal principle and has been reached by taking into account all the relevant, and only the relevant, circumstances.
3. Although neither the EPC nor the 1977 Act contains express provisions relating to automatic or discretionary stay of proceedings in national courts, they provide the context and condition the exercise of the discretion.
4. It should thus be remembered that the possibility of concurrent proceedings contesting the validity of a patent granted by the EPO is inherent in the system established by the EPC. It should also be remembered that national courts exercise exclusive jurisdiction on infringement issues.
5. If there are no other factors, a stay of the national proceedings is the default option. There is no purpose in pursuing two sets of proceedings simply because the Convention allows for it.
6. It is for the party resisting the grant of the stay to show why it should not be granted. Ultimately it is a question of where the balance of justice lies.
7. One important factor affecting the exercise of the discretion is the extent to which refusal of a stay will irrevocably deprive a party of any part of the benefit which the concurrent jurisdiction of the EPO and the national court is intended to confer. Thus, if allowing the national court to proceed might allow the patentee to obtain monetary compensation which is not repayable if the patent is subsequently revoked, this would be a weighty factor in favour of the grant of a stay. It may, however, be possible to mitigate the effect of this factor by the offer of suitable undertakings to repay.
8. The Patents Court judge is entitled to refuse a stay of the national proceedings where the evidence is that some commercial certainty would be achieved at a considerably earlier date in the case of the UK proceedings than in the EPO. It is true that it will not be possible to attain certainty everywhere until the EPO proceedings are finally resolved, but some certainty, sooner rather than later, and somewhere, such as in the UK, rather than nowhere, is, in general, preferable to continuing uncertainty everywhere.
9. It is permissible to take account of the fact that resolution of the national proceedings, whilst not finally resolving everything, may, by deciding some important issues, promote settlement.
10. An important factor affecting the discretion will be the length of time that it will take for the respective proceedings in the national court and in the EPO to reach a conclusion. This is not an independent factor, but needs to be considered in conjunction with the prejudice which any party will suffer from the delay, and lack of certainty, and what the national proceedings can achieve in terms of certainty.
11. The public interest in dispelling the uncertainty surrounding the validity of monopoly rights conferred by the grant of a patent is also a factor to be considered.
12. In weighing the balance it is material to take into account the risk of wasted costs, but this factor will normally be outweighed by commercial factors concerned with early resolution.
13. The hearing of an application for a stay is not to become a mini-trial of the various factors affecting its grant or refusal. The parties’ assertions need to be examined critically, but at a relatively high level of generality.”

New guidelines 5 and 6 clarify that, if there are no other factors, a stay of the UK proceedings is the default option and that it is for the party resisting the grant of the stay to show why it should not be granted.

However, as illustrated by the Court of Appeal’s dismissal of HTC’s appeal, if there are other factors, exercise of the Patents Court’s discretion may result in an application for a stay of the UK proceedings being declined. For example, new guideline 9 clarifies that it is permissible for the Patents Court to take account of the fact that resolution of the UK proceedings may promote settlement of the dispute between the parties when deciding whether or not to grant a stay. Also new guideline 7 suggests that the Patents Court will be more likely to refuse to grant a stay where the patentee offers an undertaking to repay any damages awarded in the UK proceedings if the patent is subsequently revoked in the co-pending opposition proceedings before the EPO, as IPCom had done in this Appeal.

We will have to wait to see how the Patents Court applies these new guidelines in future when exercising its discretion to grant a stay of UK proceedings pending the outcome of co-pending opposition proceedings before the EPO.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking before any action in reliance on it.