Hong Kong’s High Court has handed down an important decision in SNE Engineering v. Hsin Chong Construction. Jeffrey McLean and Stanley Ng explain how the judgment confirms the applicability of the purposive approach to claim interpretation for Hong Kong patents.

On March 26, 2014 the Hong Kong High Court handed down an important decision in the case of SNE Engineering Co Ltd v. Hsin Chong Construction Co Ltd. The judgment confirms the previous decision in Improver Corp v. Raymond Industrial on the applicability of the purposive approach to claim interpretation for Hong Kong patents. This is the first case in which a short term patent drafted in Chinese has been interpreted using a purposive construction (the “Catnic” approach) in Hong Kong. Applying this approach, the Hong Kong High Court found the patent in question invalid for lack of sufficient support, lack of novelty and a search report which was inconsistent with the claim interpretation proposed by the patentee. The Catnic approach refers to a 1982 decision of the United Kingdom House of Lords, which acted as the final court of appeal in the UK until the establishment of the Supreme Court in 2009. Under the Catnic approach, the decision held that a patent must be read in a “purposive” manner that focuses on the essential features of the patent. The Hong Kong decision is significant in three ways; it confirms the applicability of Catnic principles to both English and Chinese language patents in Hong Kong, it highlights the burgeoning responsibility on the part of patentees of short term patents to provide appropriate search reports and finally, it highlights the importance of having a quality patent specification, an ongoing issue in the market.

Background

The plaintiff, SNE Engineering (SNE), was engaged by the head contractor, co-defendant Hsin Chong Construction (Hsin Chong), to remove foundation piles of demolished buildings at various construction sites for the Hong Kong-mainland high speed railway.

After a dispute between the parties arose due to alleged unsatisfactory progress of pile removal, SNE became aware that Hsin Chong was considering termination of the sub-contract.

SNE then applied for a Hong Kong short term patent (HK1150416) in an attempt to protect the pile removal method that had been used at the construction site. It appears that the patent was filed as a tactic by SNE to improve its position in its negotiations with Hsin Chong regarding the termination of its sub-contract, after the relationship began to break down. However, the subcontract was eventually terminated, and Hsin Chong took over the work, continuing to use the same method as employed by SNE in removing the piles.

  1. SNE sued, claiming infringement of its patent while Hsin Chong counterclaimed that the patent was invalid for lack of novelty and insufficient disclosure.

The Invention

The invention pertained to a construction method which involved the extraction of foundation piles from the ground.

In finding that the patent was invalid, the judge concluded the way the extraction method operated in practice was different from the way the extraction method was described and claimed in the patent, due to serious deficiencies in the drafting of the patent. The judge further concluded that the patent was invalid and unenforceable due to a lack of sufficient disclosure.

Extraction Method as Taught by the Patent Specification

The invention defined by the claims and taught in the specification was summarized as involving the following steps (see paragraph [127] of the judgement for the claims):

  1. sinking a steel casing;
  2. excavating the soil inside;
  3. wedging a circular wedge between the pile and the casing; and 4) cutting/breaking the pile by driving the circular wedge to move.

Click here to view image.

Extraction Method in Practice

In practice, the pile extraction method consists of the following steps (see diagram below) (see paragraph [38] of the judgement):

  1. Inserting a steel casing around the pile (H-shaped cross sectional profile) to be removed;
  2. Excavating the soil from the casing;
  3. Inserting a star-shaped wedge between the pile and the internal circumference of the casing, thereby jamming and immobilizing the pile within the casing (the jamming step); and
  4. Rotating the casing, thereby exerting a force on the wedge which in turn twists the pile until it breaks (the twisting step).

Click here to view image.

SNE alleged the Patent did cover the above method of pile removal, as used in practice.

Differences Between the Patent and the Actual Method

The judge observed that, upon a proper reading of the specification and the claims, there was no clear disclosure of the use of the wedge as a jamming device.

Additionally, the judge found that there was confusion in the specification as to whether the casing was rotated in order to drive the circular wedge to move.

As the jamming and twisting steps were considered by the judge as the “pith and marrow” of the invention, and the rotation of casing as “a very important step,” the failure of the specification to explicitly mention such “essential particulars” was detrimental to its validity. The specification, according to the judge, was “badly drafted.”

Further, the key concept of using the wedge to jam the pile within the casing necessary for the practical operation of the pile removal was inconsistent with the positioning of the wedge represented in the figures of the specification. In fact, the judge held that the patent appeared to suggest use of the circular wedge as a cutting device to cut the pile.

Sufficiency of the Patent Specification

In assessing the sufficiency of the disclosure (i.e. whether the invention has been disclosed in the specification “in a manner sufficiently clear and complete for it [the invention] to be performed by a person skilled in the art”), the judge applied English case law on the interpretation of the patent claims and specifications and upheld the principle of purposive (“Catnic”) construction.

These principles of interpretation were applied, notwithstanding that the short term patent in question was drafted in the Chinese language. As such, the judge applied traditional common law approaches of claim construction in the interpretation of Chinese claims.

The inadequate disclosure in the patent, internal inconsistency and inconsistency with the practical operation of the invention meant that the skilled person was left in a state of uncertainty as to how to carry out the invention.

The judge reaches this conclusion of the basis of six separate types of deficiencies, and such uncertainty, together with numerous technical flaws in the specification, lead to the patent being held invalid for lack of sufficient disclosure.

In another noteworthy aspect of the case, a hindsight influenced approach advanced by the plaintiff as to the construction of the ambiguities in the claims was rejected by the judge.

Specifically, although it was not necessary to decide upon the issue of infringement after declaring the patent invalid for lack of sufficiency, the judge explicitly declined to decide whether a star-shaped wedge used by Hsin Chong could be considered a variant of the “circular wedge” claimed in the patent. However, in obiter dicta the judge described the submission of the plaintiff counsel as trying to stretch the meaning of the word “circular” to include “a star-shaped wedge.”

Although the plaintiff’s claim could have been dismissed simply upon a finding of invalidity due to lack of sufficient disclosure, the judge also went on to determine whether the patent was novel.

Novelty

In Hong Kong, a short term patent is an unexamined patent which will proceed to grant upon the provision of a search report (which can be favourable or unfavourable) issued by a recognized searching authority.

In infringement proceedings, the onus is on the patentee to demonstrate validity, as the grant of the patent under the Patent Ordinance is not determinative (Section 129(1)(a)). Thereafter, the alleged infringer has the burden to adduce evidence to the contrary – i.e., that the patent is not novel.

Therefore, Hsin Chong had the onus of proof of proving the existence of any anticipatory prior disclosure. Hsin Chong was unsuccessful in its arguments that the following amounted to anticipatory disclosure:

  1. statements by SNE in a preparatory meeting between the parties that the pile removal method was widely known and used in Japan because Hsin Chong was not able to provide sufficient particulars on the use of the method in Japan;
  2. a brochure published in Japan by one of the founders of SNE was considered as insufficiently enabling, as the brochure did not sufficiently disclose the crucial “jamming” and “twisting” steps.

However, the judge found that the invention had still entered the public domain. This was because the pile removal method was disclosed to Hsin Chong during the preparatory meeting, and SNE had demonstrated no intention of keeping the method confidential. This was inferred from SNE’s claims that there was widespread usage of the method in Japan and the subsequent conduct of SNE.

Although this was already determinative on the issue of novelty, the judge further considered whether the previous use of the method in Hong Kong by SNE amounted to disclosure to the public.

The question of public disclosure is determined by whether a skilled person could work out the pile removal method by observing the operation of the method at a public place. It is irrelevant whether anyone actually arrived at the invention through such observation.

The judge held that a skilled person in the art, through observing the components being inserted and removed from the casing, and noting the twisted nature of the pile taken out, would receive a “big clue” as to the jamming and twisting steps.

Accordingly, such a person would be able to determine how the invention worked and the usage would amount to a public disclosure. Since the disclosure to the public was not subject to any obligation of confidentiality, the patent was deprived of novelty. Ironically, the judge found such observations by a member of the public would reveal more about the steps of the pile removal method than the patent specification itself.

Search Report Requirement

It has been generally understood that in order to obtain grant of a Hong Kong short term patent, the provision of a search report in relation to the invention is a formality.

However, the judge seemed to regard the provision of a search report as more than a formality, and instead found that the provision of a search report amounted to a substantive duty on the plaintiff.

The examiner responsible for the search report considered the cutting of the pile by rotating only the circular wedge as a novel feature. However, the examiner’s understanding of the invention was substantially different from the pile removal method proposed by SNE as being the invention.

Accordingly, the examiner’s search was found to be for an invention that was not the subject matter of the short term patent, such that a search report “in relation to” the invention had not been provided as required under Section 113 of the Patents Ordinance. Such non-compliance also rendered the patent invalid.

The court held that an applicant of a short term patent has a duty to ensure that the opinion expressed therein is consistent with the subject matter of the invention, based upon the requirements of the ordinance.

Lessons Learned

The case confirms that the principles of claims construction, novelty and sufficiency of disclosure well known to patent practitioners of common law countries will be applied by Hong Kong Courts notwithstanding that the patent may be drafted in Chinese.

The decision is also a salutary reminder of the importance of filing a patent before the product is commercialized and to ensure that the patent is drafted by a skilled attorney. For mechanical inventions in particular, the component parts, their inter-relationships and intended function of each part must be described and claimed appropriately.

To protect novelty, if any disclosure of the invention is necessary prior to the patent application, e.g. to potential business partners, or it is necessary to engage a third party to test the invention, a non-disclosure agreement must be signed.

A patentee of a short term patent must ensure that any search report submitted for grant of that short term patent is issued in respect of the invention of the patent.

Finally, it is important to avoid anticipatory disclosure of the invention to the public. If a field test of machinery is required, it should be conducted in private in an enclosed area, or at a remote site where public access is prohibited, to avoid such use being potentially anticipatory.