Last Friday, Mr Justice Floyd gave judgment in favour of Contour Aerospace (formerly Premium Aircraft Interiors UK) and its customers in the long-running patent dispute with Virgin Atlantic Airways relating to the Solar Eclipse business class seat.
This raises interesting questions regarding the High Court's ability to review decisions by the European Patent Office (EPO) and brings the issues associated with the Court of Appeal's decision in Unilin Beheer BV v Berry Floors NV  into focus (a point of law due to be heard by the Supreme Court in 2013).
The background to the dispute between Virgin and Contour is complex, but merits consideration.
In 2004, Virgin applied to the EPO for a patent in relation to an aircraft seating system, EP 1,495,908. This claimed the rights to a system in which aircraft seats were arranged in an inward facing herringbone formation (namely a single column, angled toward the aisle rather than facing forward).
On the application form (Form 1001E), Virgin did not designate the UK as a state in which the patent should be granted. Ostensibly, it took this decision because of concerns over the validity of the patent in light of an intervening patent application filed at the UK Intellectual Property Office (UKIPO).
However, on publication and grant of the patent, the UK was designated as a state in which the patent should be granted. As confirmed by the Opposition Division (see below), this was a clear mistake by the Examination Division of the EPO.
On the grant of the patent, Premium Aircraft Interiors Group (which used to be in the same group of companies as Contour) wrote to the EPO to request the designation of the UK be corrected under Rule 140 EPC. At the same time it opposed the patent on the basis that it was invalid, as discussed below.
In doing so, it set out the relevant aspects of the history and concluded that the application was not, from the date of filing, ever an application for a grant of a European Patent (UK). The Opposition Division subsequently passed the request on to the Examining Division, on the basis that the issue did not fall within its competence.
The Examining Division (formed of three patent examiners) responded to the Opposition Division (not Premium Aircraft Interiors Group) stating that it was not necessary to correct the register because:
- the "ambiguity" in Form 1001E should have been clarified with Virgin (contrast this with Mr Justice Floyd's finding that the form "could scarcely have been clearer");
- designation was by payment, not by indication on Form 1001E - a point which is simply wrong at law (see (then) Article 79(1), EPC);
- the EPO was bound by a principal of good faith having accepted the designation of the UK (the legal basis for which was unsubstantiated); and
- the Examining Division could not correct the register to the disadvantage of the patentee (again, the legal basis for which was unsubstantiated).
When relaying this response to Premium Aircraft Interiors Group, the Opposition Division did not give it any credence, noting that it "certainly regrets any adverse effect that might result for [Premium] or, more generally, for the public from the administrative mistake which occurred [sic] during the examination proceedings leading to grant".
In response, Premium Aircraft Interiors Group launched an appeal to the Technical Board of Appeal. However, the Technical Board of Appeal held that such an appeal was inadmissible because only parties involved in the first instance proceedings (namely, Virgin) were entitled to appeal. As Premium Aircraft Interiors Group was not a party to the prosecution, it was not entitled to file an appeal.
Subsequently, Premium Aircraft Interiors Group applied to the Comptroller at the UK Intellectual Property Office (UKIPO) for correction of the register under Rule 50 of the Patents Rules 2007. The hearing officer, Mr A.C. Howard, dismissed the application on the basis that the question he had to decide was "whether or not the European Patent (UK) exists". He went on to say that this was tantamount to judicial review of the EPO, which would be wrong in principle. Premium Aircraft Interiors Group appealed to the High Court.
In 2006, Contour launched the Solar Eclipse seat, a business class lie-flat seat. In 2007, following the grant of EP (UK) 1,495,908B1, Virgin alleged design right and patent infringement. At first instance, Mr Justice Lewison (as he was then known) found that the design rights and patent (while valid) were not infringed.
Virgin appealed the decision in relation to patent infringement, the Court of Appeal overturning it and finding the patent valid and infringed. In January 2010, having rejected Contour's application for a stay pending the hearing before the Technical Board of Appeal at the EPO (listed for four months thereafter), the Court of Appeal ordered an Inquiry as to damages and an injunction.
Due to the eruption of Eyjafjallajökull in Iceland, the hearing before the EPO was postponed to September. At the hearing, the Technical Board of Appeal indicated that the patent was invalid for anticipation. Consequently, Virgin amended the patent to claim an extension surface to the rear of the seats so that when these reclined to a lie-flat bed, the surface of the bed could be extended towards the concave aircraft cabin wall.
Previously, Virgin had given a declaration of non-infringement in relation to an equivalent claim in its patent GB 2,296,103 and withdrawn an allegation of infringement in relation to an equivalent dependent claim in unamended EP 1,498,908B1. Yet in this case, under the principal in Unilin, Virgin maintained that it was still entitled to damages of up to £49,000,000 (although on a without prejudice basis it waived its injunction).
Contour applied to the Court of Appeal to vary the Court of Appeal's Order and/or for permission to appeal to the Supreme Court on the Unilin point. The Court of Appeal dismissed Contour's application.
Contour applied to the Supreme Court directly, which granted permission to appeal in relation to the Unilin point. However, the Supreme Court stated that as it did not want to deal with a hypothetical situation, the question of whether the amended patent, EP (UK) 1,495,908B2, was valid and infringed should be determined before it addressed the issue. By consent the inquiry as to damages was stayed, pending the outcome of the trial of the amended patent.
Virgin had previously commenced proceedings against Contour's customers, Delta Air Lines, Air Canada and Jet Airways, but then either formally or informally stayed them. For Delta Air Lines, an application for summary judgment on the basis of the amended patent proved successful at first instance but not on appeal. Following this outcome, Virgin re-commenced the litigation against the customers, joining Contour as a co-defendant to each of the actions.
While Jet Airlines declined to take part in proceedings, Contour, Delta Air Lines and Air Canada defended the action. They did so based on an argument of non-infringement and that the patent was a nullity because of the 'non-designation' issue set out above, counterclaiming that the patent was invalid for added matter.
Contour and Delta also counterclaimed that, on Virgin's construction, the patent was anticipated or obvious and argued abuse of process and estoppel (on the basis of Virgin's declaration of non-infringement and withdrawal of the equivalent dependent claim set out above). Additionally, Contour sought a declaration of non-infringement in relation to a modified version of the Solar Eclipse seat.
In the meantime, Virgin commenced equivalent proceedings in the USA and Canada against Delta and Air Canada respectively. Further, in June 2011 and October 2011, Virgin was granted two new divisionals (which it filed in response to the Technical Board of Appeal's decision), EP 2,272,711B1 and EP 2,289,734B1. In October 2011, it amended its pleadings to include these patents against Contour only on a quia timet basis.
Infringement and validity
The Solar Eclipse seat did not have an extension surface to the rear of the seat which, when reclined to lie-flat, extended the length of the bed. Consequently, in relation to EP (UK) 1,495,908B2, Virgin argued that the headrest to the Solar Eclipse seat was an extension surface or, alternatively, the plastic close-out to the rear of the seat (which was at least four inches lower than the surface of the bed) was the extension surface.
The Court held that EP (UK) 1,495,908B2 (while valid) was not infringed and that, if Virgin's construction was adopted, would be invalid for added matter. Mr Justice Floyd declined to make any findings in relation to the abuse of process and estoppel arguments. With regard to the divisionals, he held that EP (UK) 2,272,711B1 and EP (UK) 2,289,734B1 were valid and that while the former would not have been infringed, the latter would have been. Oppositions are pending before the EPO in relation to these two patents. Mr Justice Floyd granted the declaration of non-infringement in relation to the modified version of the Solar Eclipse.
Notably, on the question of validity, Mr Justice Floyd adopted the Court of Appeal's reasoning in relation to EP (UK) 1,495,908B1 (with which the Technical Board of Appeal disagreed, having found that it was anticipated) and transposed it to EP (UK) 1,495,908B2 and divisionals EP (UK) 2,272,711 and EP (UK) 2,289,734. Mr Justice Floyd did not provide any authority for disagreeing with the EPO nor transposing the Court of Appeal's reasoning as to construction on to different patents.
It is interesting to note that, in doing so, Mr Justice Floyd effectively disregarded the decision of the Technical Board of Appeal (which adopted a different construction to the Court of Appeal). This is to be contrasted with the approach adopted by Mr Justice Floyd in relation to the 'non-designation' issue (explored further below). Here he concluded that he was not entitled to review even the administrative decisions of the EPO.
Having found that Virgin's statement that it did not want to designate the UK as a state in which the patent was granted was clear and setting out the (largely irrevocable) effect of such a withdrawal under (then) Article 79(3), EPC and (then) Rule 88 of the Implementing Regulations, Mr Justice Floyd sought to resolve the question of whether a national Court was entitled to give declaratory relief to address the subsequent administrative error by the EPO.
Contour argued that decisions of the EPO are justiciable in the English courts under modern principles of private international law. It did this on the basis that the EPO grants domestic private law rights which are reflected in the domestic intellectual property register. Virgin argued that the English courts were not entitled to investigate such matters as such an investigation would amount to a collateral attack on the decision of the EPO which the English Courts should not entertain (compare this with the Court's approach adopted in relation to validity set out above).
Mr Justice Floyd noted that it is a long-standing principle of English common law that (subject to certain exceptions) an individual affected by the act of a domestic public authority could ask the Court to enquire into the legality of the public authority's acts (see, for example, Boddington v. British Transport Police  and Anisminic v.Foreign Compensation Commission ). This is reflected (again, subject to certain limitations) in Art. 6(1) of the European Convention on Human Rights and European Union law (see, for example, Johnston v. Chief Constable for the Royal Ulster Constabulary Case 222/84 ).
By contrast, Mr Justice Floyd cited Lord Oliver in the Tin Council case, J.H. Rayner (Mincing Lane) Ltd v. Department of Trade and Industry  to note that an equally strong principle existed where English Courts do not regard themselves as competent to adjudicate on the legality of acts performed by international organisations (see also Lenzing AG's European Patent (UK) ). However, he noted that if the international organisation's acts impact on domestic rights or obligations, then under the 'domestic foothold' principle, the English Courts have authority to review those acts (see, for example, Campaign for Nuclear Disarmament v. The Prime Minister ; AY Bank Limited (in administration), AY Bank Ltd (in liquidation) v. Bosnia and Herzegovnia ); Republic of Croatia v. Republic of Serbia ; and Republic of Ecuador v. Occidental Exploration and Production Company ).
Mr Justice Floyd focussed on two authorities, Ecuador and Lenzing. In Ecuador, a bilateral investment treaty had been concluded between the United States and Ecuador. The agreement gave standing to investors to pursue dispute resolution by arbitration. A dispute subsequently arose between an investor, Occidental, and Ecuador. Ecuador challenged the jurisdiction of the arbitrators in London over the subject matter of the dispute. The arbitrators held that they did have jurisdiction and determined the majority of the dispute in favour of Occidental.
Ecuador applied to the Court to challenge the award under the terms of the Arbitration Act 1996. To decide this, the Court needed to look at the arbitration agreement contained in the bilateral investment treaty. At first instance, Mr Justice Aikens held "in my view, in this case there is a foothold in domestic law for a ruling to be given on international law. That foothold is the right given by section 67 of the 1996 Act...". This was affirmed on appeal.
In Lenzing AG's European Patent (UK) , Lenzing had been unsuccessful in proceedings before the Technical Board of Appeal in resisting the post-grant revocation of its European patent in opposition proceedings. The Comptroller recorded this fact on the UK register. Lenzing sought judicial review of the Comptroller's action and rectification of the register under section 34(1) of the Patents Act 1977. Mr Justice Jacob (as he was then known) dismissed the application holding that the EPO was an international organisation which the UK had agreed would be the final arbiter of revocation.
Lenzing subsequently applied to the European Commission of Human Rights (ECHR), complaining that its rights of access to a Court under Article 6 had been violated. The ECHR held that Mr Justice Jacob's refusal to address the merits was only acceptable on the basis that the international organisation provided "equivalent protection". Having reviewed the main provisions of the EPC, the ECHR concluded that the Technical Board of Appeal provided such "equivalent protection".
Mr Justice Floyd held that there was not a domestic foothold and that, in any event, the EPC provided "equivalent protection". He concluded, therefore, that the English Courts could not give the declaratory relief sought. In doing so, he distinguished Ecuador on the basis that the bilateral investment treaty expressly contemplated arbitrations where domestic law might apply. Further, he concluded that the EPO provided the "equivalent protection":
"Not every decision in the grant procedure which may adversely affect the rights of an individual is capable of challenge: a line has to be drawn between those decisions which are to be capable of a full challenge and those which are not, or which are simply to be subject to a review. The EPC as a whole has decided where those lines are to be drawn. The extent to which the designation of the UK may be challenged in proceedings before the EPO, namely by asking the appropriate division to review its decision, represents the agreement of the contracting states on where the line is to be drawn in that respect."
It seems surprising that the judge found that, while the treaty in Ecuador did contemplate domestic arbitration, the EPC does not contemplate domestic litigation (a process akin to arbitration) where domestic law might apply. Indeed, section 60(1) of the Patents Act 1977 says that a patentee can only commence proceedings in the UK in relation to its European Patent (UK) provided it is in force. Mr Justice Floyd stated (but did not explain his reasons) that "[t]he requirement that the patent be in force is no more than a requirement that it has not lapsed, expired or been revoked. The requirement for designation does not require the court to look further than the mention of grant in the Bulletin".
Further, one has to question how a system (which Mr Justice Floyd characterised as follows) provides the "equivalent protection" to third parties (as per the Technical Board of Appeal in Lenzing):
"Thus, in the Examining Division, which was the competent department, Premium was not a party, and in the [Opposition Division], in which Premium was a party, the department was not competent."
As to Premium Aircraft Interiors Group's appeal from the Comptroller in the UKIPO, Mr Justice Floyd concluded that this was bound to fail given the reasons set out above. Notably, however, he also concluded that Rule 50 was the incorrect procedural choice for seeking correction of the register as, in accordance with Rule 50(4), any corrections which the Comptroller wishes to make need to be agreed with Virgin (something it was unlikely to do). Rather, the application should have been made under section 34 of the Patent Act 1977.
Subject to any appeal from Virgin, it is now for the Supreme Court to decide (at a hearing listed for April 2013) whether Contour should pay damages of up to £49,000,000. In short, these are potential damages for a patent which should never have existed (because it was never designated), is deemed never to have existed in the form in which it was found to be infringed and which has been found not to be infringed in its current form.
It is notable that this or similar issues have arisen in at least four cases in the last eight years. These include Coflexip SA v. Stolt Offshore MS Ltd  (see also ITP SA v. Coflexip Stena Offshore Ltd A3606/00); Unilin Beheer BV v. Berry Floor NV; and (potentially) Nokia OYJ (Nokia Corporation) v IPCom GmbH & Co Kg .
Contour has been forced to defend itself twice in relation to the same patent. In both instances, it has been successful in establishing either that the patent is invalid or, as amended, not infringed.