When should a case be put on hold? Revised guidance issued on staying patent validity cases in the English courts

Patent litigation in Europe is currently complicated by a system of dual jurisdiction over the validity of patents granted by the European Patent Office (EPO). At the moment, whilst the domestic courts of the countries that are part of the European Patent Convention have exclusive jurisdiction over patent infringement disputes, for a limited period post-grant both they and the EPO have jurisdiction over questions of validity, due to the availability of the centralised opposition procedure to attack validity of patents granted by the EPO.

Invalidity can be used as a defence, and in some countries as a counter claim, to a patent infringement suit; more often that not in the UK that is what happens. Where an opposition to a patent has been filed at the EPO, and that patent is also litigated in the UK, it is therefore often the case that there are parallel proceedings underway in the UK domestic courts and at the EPO, both of which may decide on the validity of the patent.

Since the domestic courts and the EPO may come to different views on the validity of a patent there are rules about which decisions of one jurisdiction may override decisions of another. Firstly, a domestic court’s decision on validity only affects validity of the patent in that jurisdiction, whilst the outcome of opposition (and appeal) proceedings at the EPO is effective across all the European designated states covered by the patent. Secondly, a decision to revoke a patent in either a domestic court or the EPO stands, even if the other jurisdiction finds the patent to be valid. As a consequence, if, for example, the English court revokes the UK part of the patent and the EPO upholds the patent, then it is revoked for the UK but not other states. If the EPO revokes the patent, then it is revoked for all designated states, including the UK, even if the English court has previously decided that it is valid. Conversely, a decision to uphold the patent, by either the domestic court or the EPO, can be overturned by the other jurisdiction (although, as noted, the domestic courts can only ever revoke the patent for their own domestic jurisdiction).

Since the EPO is therefore the ultimate arbiter of invalidity (but not validity), with a revocation by the EPO being final for all designated states, it is possible for a domestic court’s finding of validity to be subsequently overturned, and the patent revoked. Where, as is so often the case, the domestic validity dispute is connected to an infringement dispute, it is possible for the courts to find a patent valid and infringed, and to dispense a remedy to the patent proprietor, only to subsequently find that the patent is revoked due to a finding of invalidity by the EPO.

Revocation of a patent is said to be ab initio, that is the legal effect of revocation is that the patent is deemed never to have been granted. A risk therefore arises that a remedy, such as the payment of damages, is granted for infringement of a patent that never, legally, existed.

Until recently, the only real tool available to the courts to manage this risk has been the option of trying to time proceedings in the UK such that the EPO may come to a decision first. In this way, a decision to revoke the patent in the EPO would end the English proceedings, whereas a decision to uphold the patent by the EPO could potentially still be overturned in the subsequent domestic proceedings, in relation to the patent rights in that specific country.

This coordination has sometimes been achieved through the grant of stays of proceedings, and on a couple of occasions by the courts requesting a rapid conclusion by the EPO (which has responded positively). However the English court has not automatically stayed proceedings when there are parallel EPO opposition proceedings underway, since to do so would not always be the most just approach. Oppositions at the EPO often take many years to resolve and the courts are interested in providing, and are mandated to provide, rapid justice and certainty for disputing parties.

For this reason the English court has previously adopted certain guidelines for determining whether or not to stay proceedings, as set out in Glaxo Group Ltd v Genentech Inc and Biogen Idec Inc. In that case, the Court of Appeal was requested by the parties and the trial judge to provide guidance on when a stay of proceedings was appropriate in cases where parallel validity proceedings were underway in the national court and at the EPO. The Court of Appeal set out nine guiding principles, stressing that the discretion to stay or not, which is very wide indeed, should be exercised to achieve the balance of justice between the parties having regard to all the relevant circumstances of the particular case.

The guidance further stated that: “one factor affecting the discretion will usually carry more weight than any other. That is the length of time that it will take for the respective proceedings in the national court and in the EPO to achieve some certainty on the issue of the validity of the patent in suit so that business knows where it stands. The length of the stay of proceedings, if granted, is, in general, the most significant factor in the discretion. Both the parties’ legitimate interests and the public interest are in dispelling the uncertainty surrounding the validity of the monopoly rights conferred by the grant of a patent and the existence or non-existence of exclusive proprietary rights on a public register. A decision in the revocation action in the Patents Court will dispel some of the uncertainty. If the likelihood is that proceedings in the Patents Court would achieve this resolution significantly sooner than the proceedings in the EPO, it would normally be a proper exercise of discretion to decline to stay the Patents Court proceedings. They should be allowed to proceed to a decision that would supply some certainty in the public interest and the parties’ legitimate interests.”

Importantly, the guidance indicated that mere duplication of legal proceedings is not automatically enough of a ground for a stay of the proceedings in the Patents Court.

Following on from this case, the practice adopted by the court erred on the side of not staying proceedings, most frequently because of the long timeframe of the EPO proceedings and the need for some certainty at least in one country.

However, in at least one case, following these guidelines resulted in a potentially seriously unfair outcome. In our earlier article: “Common sense prevails over common-law in the English courts”, we discussed the Supreme Court decision in Virgin Atlantic Airways Limited v Zodiac Seats UK Limited, and noted its potential impact upon the attitude of the courts to staying proceedings in patent litigation. In this case, the risk of an unjustifiable remedy, for infringement of an ultimately non-existent patent claim, was not avoided by the English courts coordinating proceedings between themselves and the EPO. The defendant found itself potentially having to pay a very large damages bill for infringement of patent claims that were subsequently revoked (with ab initio effect) by the EPO.

In this case the Supreme Court decided to overturn a long standing legal practice, and in that way dealt with this apparent unfairness. Moreover, in so doing Lord Sumption strongly urged the lower courts to reconsider the Glaxo guidance for determining the allowability of stays of proceedings.

This call to review the guidelines has already been taken up by the Court of Appeal in the decision of IPCom GmbH & Co KG v HTC Europe Co Limited (and others). After careful consideration of a number of competing considerations Lord Justice Floyd set out a revised set of guidelines, modelled on those from the Glaxo judgement, but aimed at making stays of proceedings much more likely to be granted in certain circumstances. In so doing, Floyd LJ set out that: “If there are no other factors, a stay of the national proceedings is the default option.  There is no purpose in pursuing two sets of proceedings simply because the Convention allows for it.”

On the face of it, this reverses the Glaxo guidance, which established that mere duplication of proceedings did not, by default, lead to a stay. By comparison to Glaxo, the IPCom guidance also increases the onus on a party that is resisting a stay to clearly indicate why it should not be granted.

On the specific matter that prompted the Supreme Court to call for a change in practice, the Court of Appeal stated that: “One important factor affecting the exercise of the discretion is the extent to which refusal of a stay will irrevocably deprive a party of any part of the benefit which the concurrent jurisdiction of the EPO and the national court is intended to confer.  Thus, if allowing the national court to proceed might allow the patentee to obtain monetary compensation which is not repayable if the patent is subsequently revoked, this would be a weighty factor in favour of the grant of a stay.  It may, however, be possible to mitigate the effect of this factor by the offer of suitable undertakings to repay.”

The changes in guidance brought about by IPCom are not intended to sweep away the guidelines from Glaxo. Maintaining the balance of justice between the parties, having regard to all the relevant circumstances of the particular case, is still the underlying principle at which the rest of the guidance aims. However, the likelihood of a stay of proceedings must surely now be greater in the English courts than before. Since a stay can sometimes benefit the patent proprietor and sometimes the potential infringer, depending on the circumstances of the case, there appears to be no overall tactical winner in this development. Instead it can be hoped that the real winner, this time, is justice.