Unilin, the patentee, had sued Berry Floor and two others in the Patents County Court ("PCC") soon after its European patent had been granted but before the opposition period had expired. Judge Fysh in the PCC held that Unilin’s patent was valid and infringed. The decision was upheld by the Court of Appeal ("CA") and the House of Lords dismissed the defendants’ petition for leave to appeal.
Following the success on validity and infringement, Unilin had unconditional final orders in its favour:
a) entitling it to proceed with an inquiry or account of profits;
b) for 80% of the costs of the original trial and all the costs of the appeal; and
c) all of the costs of the issue of good faith and reasonable skill and knowledge both at first instance and on appeal.
All of these orders were the result of fully fought contests. The matters had been finally determined and no further appeal lay from any of them.
When Unilin applied for directions for the damages inquiry or account of profits, the defendants applied for a stay of those proceedings and of the assessment of all the costs orders. The basis of the defendants’ application was that the opposition to the patent in the EPO was not yet over and the patent may be revoked or limited in such a way that the products held to be infringing would not be covered by the patent.
Before deciding on the issue of stay, Judge Fysh QC in the PCC had to first consider whether Unilin’s entitlement to financial relief and costs was res judicata. Judge Fysh QC held that Unilin’s entitlement to financial relief and costs was not res judicata. However, he decided to refuse a stay in respect of the damages inquiry/ account of profits and in respect of the assessment of costs.
Unilin appealed to the Court of Appeal on the finding of no res judicata and the defendants appealed the refusal to stay the inquiry or account.
The CA held that the defendants were estopped from challenging Unilin’s entitlement to an account of profits, whatever the ultimate result in the EPO. Unilin’s entitlement to financial relief and costs was therefore res judicata.
The CA reiterated that there was a strong public interest in the finality of litigation. A defendant who has had a full and fair opportunity of attacking the validity of the patent but lost would have a strong motive for finding further prior art or other grounds for attacking a patent either himself or through a third party. The defendant should however put his best case forward the first time round and it is important that he knows that he will not have a second chance, whereby he could undermine the first decision.
The CA also held that even if there were no estoppel, past orders as to costs could not be challenged. Since the defendants had fought points on which they had lost, even if the patent is ultimately held invalid, they should pay Unilin.
With regard to the stay of proceedings, Lord Justice Jacob in the CA said that that was a matter for the discretion of the Judge in the PCC. He could not see any error of principle by the Judge. As Unilin had a judgement in their favour, unless there were good reasons otherwise, they should be allowed to get on with enforcing it. The defendant’s application for a stay of the proceedings relating to the account and costs was therefore dismissed.
The importance of finality of a judgement as a matter of public policy cannot be under-estimated. However, the fact that an order for revocation of a patent has retrospective effect, does lead to a situation where a defendant in a patent infringement action who has been unsuccessful in challenging the validity of a patent has to pay the successful patentee’s costs even if the patent is subsequently revoked. In effect, the defendant has to pay costs for defending against someone’s right which should have never existed.
On the other hand, looking at it from the patentee’s point of view, he has incurred costs for the unsuccessful arguments raised by the defendant because if the defendant had raised the piece of prior art or other ground on which a patent is subsequently revoked, then the defendant would not have lost in the first place. Hence, the defendant is paying the cost of his unsuccessful arguments.