Common sense prevails over common-law in the English courts

For many centuries the law of England and Wales has been governed by the principle of equity, a principle which takes supremacy over its cousin, common-law. The law of equity arose so that any unexpectedly harsh consequences of a strict application of the law of precedent from common-law could be mitigated, originally by appeal to the King (and subsequently to the Court of Chancery). Fairness was, and still is, at the heart of the principle of equity.

A second corner-stone of the English legal system is Res judicata. Res judicata, a complex and multifaceted legal concept, acts to prevent the same issues being litigated more than once by the same litigants. A principal aim of the concept is to prevent abuse of process and to support the good administration of justice.

In a recent patent case heard in the UK Supreme Court, these two principles came up against one another, with equity winning out, in a judgement that overturned a common-law practice that had stood for over 100 years.

The case was Virgin Atlantic Airways Limited v Zodiac Seats UK Limited and concerned the validity and infringement of a patent that had been granted to Virgin by the European Patent Office (EPO) and which covered the UK. The patent covered certain airliner seats and Virgin had sued Zodiac for infringement in relation to seats they provided to a number of third parties. The Patents Court found the patent valid but not infringed, but on appeal to the Court of Appeal the original finding on infringement was overturned. Zodiac failed, however, to have the patent revoked or limited and therefore following the judgement that they infringed the patent they faced an enquiry into damages. Damages were expected to be assessed at a figure amounting to several tens of millions of pounds.

In a quirk of the European patent system, running in parallel to the English court proceedings a second tribunal with authority over the validity of the patent was also considering the patent. The Technical Board of Appeal (TBA) at the EPO was considering an opposition filed by Zodiac (and others). Opposition at the EPO is a central revocation procedure in which, if the opponent(s) prevail, the patent is revoked throughout Europe. Decisions of the TBA are final and binding on all the European patent’s designated states – and any revocation or amendment is deemed by law to have an ab initio effect. Therefore if the patent is revoked by the TBA it is deemed never to have existed and if it is amended it is deemed always to have existed in its amended form.

After the judgement of the Court of Appeal in England, but before the enquiry into damages, the TBA upheld the patent, but in an amended form. All of the claims found to be infringed in the Court of Appeal judgment were revoked, leaving only claims which had not been infringed by Zodiac.

Bearing in mind the ab initio effect of this amendment, Zodiac, perhaps quite reasonably, felt they had done nothing wrong, as they had not infringed any claims deemed to have been granted, and so tried to argue that the level of damages was zero and that they should pay nothing. However, the Court of Appeal, relying on a precedent case from 1908, and on some recent applications of that precedent, denied Zodiac that right. The common-law precedent had held that the validity of the patent had already been challenged and upheld, and could not be reopened on the same facts under the principle of Res judicata. In the three previous judgments relied upon by the Court of Appeal with similar fact patterns, the unlucky “infringer” had been forced to pay damages on a subsequently revoked or amended patent.

The Supreme Court, however, took a different and unanimous view of the law of Res judicata, or at least its application to the fact pattern. In a clever analysis, Lord Sumption pointed out that Zodiac did not seek to rely on the grounds of invalidity on which they had previously lost. Rather, they sought to rely on the very fact of the amendment of the patent. That fact had not, and could not, have been argued as an issue in the earlier case, since at the time the case was heard, the amendment to the patent had not happened. For this reason, Res judicata did not apply and Zodiac was allowed to rely on the amendment in the assessment of damages.

Lord Neuberger, the President of the Supreme Court, agreed on the point of Res judicata, and further made much of the inherent fairness point, demonstrating that the issue of equity was high on his agenda in this matter.

Although tainted by a flavour of “better late than never” the Virgin v Zodiac case now establishes a fairer approach to dealing with the problems arising from the multiple forums available for patent litigation in Europe. Both the Lord Justices who provided comments exhibited some frustration with the system as it currently is, and indicated that it might be necessary to reconsider the established guidelines for the courts in deciding whether or not to stay national court proceedings when the EPO has concurrent opposition proceedings underway. It remains to be seen how the system will cope with the (probable) advent of the Unified Patent Court, and whether that court will take a similar approach to fairness in similar circumstances.