The unanimous decision of the Supreme Court in Virgin Atlantic Airways Limited v Zodiac Seats UK Limited (formerly known as Contour Aerospace Limited) will practically be the final destination for these parties in the long-haul airline seat litigation. The ruling strongly disagrees and departs from the long-standing Unilin principle which provided that a party found liable for infringement and who had exhausted appeal routes would still have to pay potentially substantial damages (essentially on grounds of res judicata cause of action estoppel) even after the patent had subsequently been revoked or amended with clear retrospective effect. The new post Unilin position means that where judgment is given in a UK Court that a patent (whether UK or European) is valid and infringed, and the patent is subsequently revoked or amended (whether in the UK or at the European Patent Office), the infringing party is entitled to rely on the revocation or amendment in any enquiry as to damages.
The judgment is the latest in a series dealing with Virgin’s claim of patent infringement in relation to Zodiac’s manufacture of a luxury airline seat design called the Solar Eclipse, for a number of airlines. This latest ruling is likely to be the one most remembered as removing what is long thought to have been an unjust artificial legal position in the UK and for potentially fundamentally altering how a UK court’s discretion to stay UK proceedings will be exercised in future when there are concurrent European Patent Office opposition proceedings.
The Supreme Court swept away the Unilin principle and puts it beyond any doubt that where judgment is given in a UK Court that a patent (whether UK or European) is valid and infringed, and the patent is subsequently retrospectively revoked or amended (whether in a National Court in the United Kingdom or at the European Patent Office) the alleged infringer is not prevented by the strict operation of the doctrine of res judicata from relying on the subsequent fact of revocation or amendment in any enquiry as to damages. The Supreme Court considered that the previous Unilin decisions were fatally flawed in assessing cause of action estoppel in an absolute sense between the parties. They ignored the impact of later events which were unforeseen (i.e. the later amendment) and failed to take account of the statutory position in the Patents Act 1977 and the European Patent Convention such that any revocation or amendment is deemed to have taken effect from the date of grant of the patent. It is clear that the Court wished to reach a just commercial decision.
The decision also interested me as it followed a similar 2004 decision of the Inner House of the Court of Session in Edinburgh in ITP SA v Coflexip Stena Offshore Limited. Although not precisely in point the Scottish decision dealt with a similar set of facts and the desire of a patent owner to preserve a liability judgement even though after the first instance decision and prior to the appeal (i.e. appeal route had not been exhausted) the relevant patent had been invalidated by the Technical Board of Appeal. In a similar light to the sentiments expressed by the Supreme Court, the Scottish Court’s decision was that there was no logical or legal basis to accept the effect of revocation in the UK on the one hand but at the same time preserving a finding on liability between the parties.
Clearly the ruling will assist Zodiac where there had been no assessment of damages. The comments in the two judgments demonstrate that the court is fully aware of the temporal impact of the ruling and that it may not always result in a just outcome. Where the assessment of damages has been concluded but no damages paid the view of the Court was that that judgment could be challenged on the ground of the later amendment or revocation of the patent as a matter of common law, although doubt was expressed whether any such right existed specifically in the Patents Act of 1977. The judgment of Lord Neuberger went further in suggesting in addition that even if damages had been paid, the alleged infringer may have a restitutionary claim enabling it to seek to recover the damages on the grounds that the patent had later been revoked or varied.
The Supreme Court has also opened the way for a re-examination of the guidance given by the Court of Appeal in Glaxo Group Limited v Gentech Inc to the effect that a Court in the UK should normally refuse a stay of such UK proceedings if the UK proceedings were likely to resolve the question of validity significantly earlier than the European Patent Office. They have suggested that the guidelines should be re-examined by the Patents Court and the Court of Appeal. Whilst it may still be the case that in many instances a UK decision will be reached significantly earlier than a validity decision of the European Patent Office, the Supreme Court pointed towards the uncertainty and significant waste of costs involved in pressing ahead with UK infringement and validity procedures commenting that it “gave little credit” to UK procedure.
On July 5, 2013