Recently the English courts have shown a willingness to grant new kinds of declarations in patent cases where a declaration of non-infringement was not an appropriate remedy. This article looks at these and other developments of the English courts’ declaratory relief jurisdiction.

Background – English law

The current basis for the grant of declaratory relief is CPR Part 40.20, which states that: "The court may make binding declarations whether or not any other remedy is claimed."

The limits on this jurisdiction have generally been set by case law. One limit is that the court will not answer hypothetical questions. If the declaration would serve no useful purpose - graphically described by Pumfrey LJ in his last judgment, Nokia Corporation v InterDigital Technology Corporation [2007] EWHC 3077 (Pat), as "the legal equivalent of shouting in an empty room" - the court will not entertain such a claim.

For a long time the received wisdom from the cases was that the courts would not grant negative declarations unless they were specifically authorised by statute, such as declarations of non-infringement of a patent (Patents Act 1977 section 71). However, in recent years this has changed.

In 2000 the Court of Appeal made it clear that the court had jurisdiction to grant declarations, both positive and negative, even when no other claim had been made. The issue was one of discretion, not jurisdiction.

In the area of patent litigation, two new types of declaration have recently been granted, a declaration of non-essentiality and a declaration that the applicant's product was obvious.

Declaration of non-essentiality

The ability of a court to grant a declaration that specified patents are not essential to the practice of a standard has been clearly established by the Court of Appeal in two cases involving mobile telecommunications.

Background

As all devices used in mobile telecommunications systems have to work together, regardless of manufacturer, standards are essential. Standards are developed by bodies in which the participants in the industry collaborate in developing and agreeing technical standards. However, if a standard is adopted, anyone having a patent essential to the practice of that standard could be in a position to put competing manufacturers out of business or at least to demand very high royalties for a licence. To deal with this problem, the standard setting bodies have adopted IP policies, which generally require participants in the standard setting procedure to declare IP rights which they hold which are, or could become, essential to the practice of that standard and to agree to licence those rights under fair, reasonable and non-discriminatory (FRAND) terms. The European standards body for telecommunications, ETSI, has adopted such a policy and very large numbers of patents have been notified to it by their owners as 'essential', as defined by the ETSI policy. ETSI makes no checks as to whether or not these patents are truly essential.

Nokia v Interdigital I

Nokia is the largest manufacturer of mobile phone handsets. InterDigital is a US company which owns a large number of patents relating to mobile telecommunications but which no longer manufactures equipment. Its source of income is now mainly from licensing.

The dispute arose between the parties over a claim by InterDigital to an increased royalty rate in an existing licence to Nokia, which Nokia disputed. Extensive international litigation between the parties ensued. In the UK Nokia brought an action for revocation of four InterDigital patents which had been declared to ETSI as essential to the GSM standard. Nokia did not seek a declaration of non-infringement because the parties agreed that all the patents were included in the existing licence, which neither party wished to terminate. After the action commenced, Nokia applied to amend the complaint to add a claim for a declaration that the patents were not essential to the ETSI GSM standard, which was resisted by InterDigital.

Pumfrey J allowed the amendment and InterDigital appealed. The Court of Appeal upheld the judgment, holding that the meaning of 'essential' was clear and there was a real commercial issue between the parties in relation to essentiality, despite the licence, so the court could exercise its inherent jurisdiction to grant such a declaration if after trial this was justified; [2005] EWCA (Civ) 614.

Nokia v Interdigital II

In a subsequent action, Nokia sought declarations that 30 of InterDigital's patents were not essential to the 3G mobile phone standards. Nokia no longer had a licence from InterDigital, so if the patents were truly essential Nokia would need one. InterDigital tried to strike out these claims, which was refused by Pumfrey J. On appeal, the Court of Appeal held that the court had jurisdiction to grant such a declaration where there was a real reason for doing so. Here Nokia had a real commercial interest in knowing where it stood in relation to needing a licence for these patents. A declaration of noninfringement would not be an adequate substitute, as Nokia would have to seek one of these each time it introduced a new 3G handset, whereas the declaration sought would cover all its 3G products; [2007] EWCA (Civ) 1618.

At trial only four patents remained in contention. In December 2007 Pumfrey LJ held that three of the four were not essential to the 3G standard, and that the apparatus claims of the fourth patent were not essential but the method claims were essential. He held that declarations to this effect would have practical utility in connection with licensing negotiations, and granted them; [2007] EWHC 3077 (Pat).

European Commission – standards and intellectual property rights

The issue of patent ambush within standard setting has come to the attention of the European Commission as noted in its publication “Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, an Industrial Property Rights Strategy for Europe” (COM(2008) 465/3). It is seen as an area of growing importance between industrial property and competition law. The Commission calls on the standard setting authorities, such as ETSI, to make effective policies to ensure disclosure and commitments to license access to essential patents on FRAND terms. The Commission will launch a fact-finding study to analyse the interplay between intellectual property rights and standards in the promotion of innovation and adopt a consultative document on standardisation in information and communications technologies in the first quarter of 2009 which will include how standards relate to industrial property rights in the sector.

Declaration of obviousness

The central importance of utility in the exercise of the court's discretion was illustrated by the decision of Kitchin J in Arrow Generics Ltd v Merck & Co. Inc [2007] EWHC 1900 (Pat). The product in issue was the drug alendronate, which had been first marketed in 1995. Merck applied for a European patent on a particular dosage regimen for the drug claiming a 1997 priority date. The parent patent was granted by the EPO but then held invalid by the English courts. It was also subsequently revoked by the EPO in opposition proceedings. However, during prosecution of the parent patent Merck filed four separate divisional applications. Following the revocation of the parent patent by the EPO, Merck then prosecuted the first of these divisionals through to grant by the EPO. Following the grant of the first divisional, Merck made statements indicating an intention to enforce this patent. Merck also decided to withdraw the UK designation. Before this withdrawal had been published, however, Arrow commenced proceedings in England to revoke this divisional patent and also for a declaration that its generic alendronate product would have been obvious at the 1997 priority date of all of the divisional patents. The purpose of the declaration was to remove any threat of further proceedings against Arrow on the three remaining pending divisional patent applications. Merck applied to strike out the proceedings.

The claim for revocation was struck out because having withdrawn the UK designation, the UK patent was never granted i.e., there was nothing to revoke. However, the claim for a declaration that the generic product was obvious was not struck out and therefore allowed to proceed. The possibility of other divisional patents being granted meant that a threat hung over Arrow's continued sales of its generic product in the UK. This threat could not be removed by revocation proceedings unless and until the divisional patents were granted by the EPO. Further, Merck had refused to give an assurance that it would not seek to enforce any such divisional patents against Arrow. In these circumstances, the Judge held that the declarations sought would serve a useful purpose and there was a clearly defined issue on which the court could rule. As a result, the claim for the declaration that the generic product was obvious at the priority date was allowed to proceed.

Interestingly, in parallel proceedings in the Netherlands, the District Court of The Hague actually granted a declaration in these terms i.e., that the generic product was obvious at the priority date. That decision is under appeal.