In an 'unprecedented' application, the Patents Court has ordered pre-action disclosure of a patentee's existing licence agreements, so that the alleged infringer can quantify its potential damages liability under the patentee's intimated infringement claim.
This is the first time in the UK that a party accused of patent infringement has obtained an order granting access to the patentee's documents going to quantum before infringement proceedings have begun.
The Big Bus Company Ltd v Ticketogo Ltd  EWHC 1094 (Pat), 28 April 2015
- Patentees who exploit their patents via licensing arrangements may need to disclose the terms of those arrangements if they threaten a third party with infringement proceedings.
- This is particularly so where the cost of proceedings may be greater than the cost of taking a licence.
- Companies facing patent infringement allegations and demands that they accept a licence may be able to obtain a court order for disclosure of the patentee's existing licence agreements. The company will need to identify a set of the patentee's licences sufficiently comparable to what it would be offered, and establish that the disclosure would help settle, dispose of, or reduce the costs of the dispute.
- Ticketogo's patent
- Pre-action correspondence
- Big Bus' pre-action disclosure application
- Satisfying the requirements for pre-action disclosure
- Discretion of the Court
1. Ticketogo's patent
Ticketogo owns United Kingdom Patent No. 2 391 101, entitled 'Ticketing system', which claims a method of issuing a ticket. Ticketogo had granted over 60 licences in respect of the patent.
2. Pre-action correspondence
In a series of inter-solicitor correspondence with Big Bus, a bus sightseeing tour company, Ticketogo indicated that it would commence infringement proceedings if Big Bus did not agree to take a licence and sent Big Bus lists of Ticketogo's current licensees.
3. Big Bus' pre-action disclosure application
Big Bus launched the present application seeking pre-action disclosure of all licences granted by Ticketogo under the patent, and in particular the licences granted to the licensees named in correspondence. Big Bus' proposed orders provided for a confidentiality club to be agreed or determined by the court as necessary.
Big Bus' evidence in support of its application pointed out that:
- Ticketogo had repeatedly relied on the fact that others had taken licences.
- Although Big Bus believed it would succeed at trial, it was concerned about the cost of the proceedings and wanted to settle the dispute.
- Disclosure of the existing licences would assist this by allowing Big Bus to establish the value of Ticketogo's claim.
4. Satisfying the requirements for pre-action disclosure
After considering the case law, Arnold J addressed the requirements for grant of pre-action disclosure under CPR rule 31.16.
1. Ticketogo and Big Bus were likely to be parties to anticipated proceedings
The requirement that both Ticketogo and Big Bus were likely to be parties to anticipated proceedings was plainly satisfied (CPR rule 31.16(3)(a) and (b)).
2. If proceedings started, Ticketogo's standard disclosure would extend to the documents now sought by Big Bus
The requirement that if proceedings started, Ticketogo's standard disclosure would extend to the documents now sought by Big Bus was satisfied only in relation to Ticketogo's licences in the transport sector (CPR rule 31.16(3)(c)).
The fact that any litigation would be determined in a split trial, with liability heard separate to quantum, was not a factor against pre-action disclosure. It was not inevitable that there would be a split trial, and even if there was, Ticketogo's obligation to give standard discovery would extend to documents relating to quantum.
It was irrelevant that Ticketogo could elect for an account of profits if it was successful, as it was more likely that Ticketogo would elect to recover damages based on a reasonable royalty.
Ticketogo's pre-action disclosure obligation extended to all its licences in the transport sector as these were 'sufficiently comparable' to the licence Big Bus would need, if it were found to infringe.
3. Disclosure was desirable to dispose of, settle, or save costs in the anticipated
The requirement that disclosure was desirable to dispose of, settle, or save costs in the anticipated proceedings, was satisfied (CPR rule 31.16(3)(d)). Arnold J agreed strongly with Big Bus' submissions that:
- Parties to intellectual property disputes often spend large sums litigating liability, entirely disproportionate to the value of the claim.
- To avoid this, it was desirable for parties to realistically assess the value of the claim at the earliest possible stage. Here this meant that Ticketogo should disclose key information concerning the value of the claim.
- This disclosure would place both parties on an equal footing, enable them to make an informed assessment of whether the claim was worth litigating, and promote settlement.
- Even if proceedings were commenced, knowledge of the value of the claim would enable the proceedings to be case managed in a proportionate manner.
5. Discretion of the Court
It was appropriate for the Court to exercise its discretion to award pre-action disclosure because it would save costs, assist with settlement, and because it would not be burdensome for Ticketogo to disclose the class of licences sought.
Importantly, Arnold J rejected Ticketogo's submission that pre-action disclosure would impinge on its 'freedom to negotiate' patent licences privately with each licensee, without each knowing what others had agreed to pay. Arnold J's view was that this was not a factor against pre-action discovery as 'transparency is a virtue'. In his view, the availability of price information is a key requirement for the proper functioning of any market, and the market for patent licences should be no exception. Big Bus should not be obliged to accept whatever royalty rate Ticketogo offered if a court would award less in damages.
Arnold J was also unimpressed with Ticketogo's assertions that Big Bus could 'form its own view of the commercial value' of Ticketogo's claim. Big Bus would not be in a position to form a view without disclosure of comparable licences. Arnold J said that with the exception of the first licensee, other licensees could have made similar applications to obtain licence documents when faced with infringement allegations from Ticketogo.