The Supreme Court has handed down a long awaited decision in Virgin Atlantic Airway Ltd v Zodiac Seats UK Ltd, which overturns a controversial line of previous UK case law including Poulton v Adjustable Cover and Boiler Block Co, Coflexip SA v Stolt Offshore MS Ltd, Unilin Beheer BV v Berry Floor NV and the 2009 Court of Appeal judgment of this case.
Commentators have welcomed the decision, which has held that the subsequent amendment or revocation of a patent is an absolute defence to liability for damages in relation to an earlier finding of infringement of that same patent. Such amendment or revocation may be made by the European Patent Office (EPO) or a UK court.
In the Court of Appeal, Virgin's European patent was held to be valid and infringed by Zodiac, and Virgin subsequently obtained judgment against Zodiac for damages in relation to infringement. After this decision, the EPO's Technical Board of Appeal (TBA) ruled that that the claims held to be infringed by Zodiac were in fact invalid. The TBA allowed an amendment of the patent so as to remove all the relevant claims but, of course, this amendment was retrospective in effect.
Virgin submitted that it was still entitled to recover damages for infringement following a string of earlier case law (such as Coflexip v Stolt) on the basis that the Court of Appeal's decision that Zodiac had infringed valid claims of Virgin's European patent was res judicata and therefore Zodiac could not now rely on the subsequent amendment. Zodiac, on the other hand, logically argued that Virgin's European patent was retrospectively amended and therefore the claims it had been held to infringe should be dealt with as never existing.
The law of res judicata was revisited by the Supreme Court, providing reasons why this principle could no longer be used by Virgin in relation to the finding of infringement in its favour.
The court listed the three forms of res judicata:
- The principle that once a cause of action has been held to exist or not to exist, that outcome may not be challenged by either party in subsequent proceedings.
- Where the claimant succeeded in the first action and does not challenge the outcome, they may not bring a second action on the same cause of action.
- The doctrine of merger which treats a cause of action as extinguished once judgment has been given upon it.
The Supreme Court stated that as the infringed claims of Virgin's patent, as they had existed, had been held invalid by the authority which granted them, they must then be treated as never having existed. Further, Zodiac had not raised this issue before, as the EPO decision came after the Court of Appeal judgment. Therefore, it was held that Zodiac could use the subsequent revocation/amendment of the patent as an absolute defence to a liability for damages.
The judgment also calls for a review of the guidelines established in Glaxo Group Ltd v Genetech Inc that currently state that an English court should generally refuse a stay of its proceedings if such proceedings could resolve validity issues earlier than the EPO. The call for consideration of these guidelines appears to be on the basis that providing a stay of the UK proceedings may save duplication of costs and prevent the risk of conflicting judgments at national and EPO level. This will put pressure on the next court to face this issue. If this assumption is revisited, this may ultimately be what this decision is remembered for. The proposed rules of the pending Unified Patent Court (UPC), expected in 2015, currently provide for a stay pending EPO proceedings, however it is not yet clear whether the rules will be implemented in this form nor how they will be applied in practice.
Judgment of the Supreme Court: http://dycip.com/virginzodiac