Global Flood Defence Systems and UK Flood Barriers Limited v Johann Van Den Noort Beheer BV and Johann Heinrich Reindert Van Den Noort [2016] EWHC 1851.
Background
DTM Legal acted on behalf of the First Defendant Johann Van Den Noort Beheer BV and Second Defendant Johann Heinrich Reindert Van Den Noort in relation to a claim brought against them for groundless threats by Global Flood Defence Systems Limited and UK Flood Barriers Limited.
The Second Defendant is the inventor of a self-closing flood barrier and is also the managing director and shareholder of the First Defendant. On 19 November 2009, an international patent application – made under the Patent Cooperation Treaty and claiming priority from a Dutch patent application – was published. The international application entered the regional phase in December 2010, and on 14 May 2011, it was published as a European Patent Application designating various states including the UK.
In November 2010, the First Claimant entered into a licence agreement to make and distribute the self-closing flood barrier. The licence agreement was terminated in January or February 2014.
In February and March 2014, following termination, the First and Second Defendant made certain threats of patent infringement proceedings. These were made by notices on the First Defendant’s website and a letter to a third party.
It is these threats that formed the basis of the groundless threats claim brought by the First and Second Claimant. It is the position of the First and Second Defendant that the threats were justified.
Whilst the actual issue of whether the threats were justified it still be decided, the Court has had to determine whether the First and Second Defendant are allowed to raise that defence to trial.
Summary Judgment
The First and Second Claimants applied to the Court for Summary Judgment to be entered against the First and Second Defendant on the basis that the Defendants’ threats can never be justified because the First Defendant did not have a granted patent at the time the threats were made.
The law in relation to threats is governed by section 70 of the Patents Act 1977. It was the position of the First and Second Claimant that the true construction of section 70 meant a threat of proceedings for infringement of a granted patent made at a time when the person making the threat only has a pending patent application cannot be justified under section 70(2A).
His Honour Judge Hacon rejected this argument and dismissed the Application allowing the First and Second Defendant to pursue a defence of justification to trial. It was accepted that the First and Defendant could pursue a defence of justification at trial and it was considered plausible that the patent would be granted by the time the trial takes place.
The interpretation of section 70 meant that the First and Second Defendant could justify their threats by establishing that the acts in respect of which proceedings were threatened constituted an infringement of their section 69 rights.
Trial
The threats trial was fixed for 8 and 9 December 2015. The European Patent Office issued a decision prior to the trial to grant the patent. However, the grant date was not until 16 December 2015 when the patent was published in the Official Bulletin and a week after the trial was to take place.
An Application was made by DTM Legal on behalf of First and Second Defendant to adjourn the threats trial on the basis that the decision to grant the patent fixed the final form of the patent claims.
His Honour Judge Hacon allowed the adjournment in these circumstances, concluding that in this particular case, the grant was imminent and it fell within Laddie J’s exceptions – whereby a short stay would be appropriate because grant of the patent was imminent (as referred to in Brain v. Ingledew Brown Bennison & Garrett [1995] F.S.R. 552).
Appeal
The First and Second Claimant appealed both the decision of His Honour Judge Hacon to dismiss the Summary Judgment Application and to adjourn the trial of the threats claim.
The decision to dismiss the Summary Judgment Application was appealed on the basis of the construction of section 70(2A) of the Patents Act 1977. This section provides a defence if a defendant can prove that “the acts in respect of which proceedings were threatened constitute or, if done, would constitute an infringement of a patent.”
In this case the First and Second Claimant argued that the acts that were the subject of the threat would not result in an infringement of a patent. At the time the acts would have been done they could only be, at best, acts which gave rights to the First Defendant under section 69.
The First and Second Defendant argued that the First and Second Claimant’s position fell down as it included a requirement in section 70(2A) that the actual threat made be justified. There is no such requirement. Section 70(2A) only requires that the particular acts complained of in the threat constitute an infringement of a patent. The statute requires the Court to look to the nature of the acts which were the subject of the threat and ask if they would be an infringement of a patent. The Court does not have to assess whether the actions of a claimant would be the particular infringement stated in the threat.
Mr Justice Arnold considered that the His Honour Judge Hacon was correct to hold that the threats in this case were capable of justification under section 70(2A). The First and Second Defendant’s construction of section 70(2A) was accepted.
Mr Justice Arnold made it clear that the “the court should be slow to conclude that section 70 makes a class of threats incapable of justification in the absence of clear wording to that effect.”
The decision to adjourn the trial of the threats claim was appealed on the basis that nothing had changed since the Summary Judgment Application. It was argued that the trial had been fixed for a date and that was the date which would ordinarily be allocated to this case. It was also argued that the First and Second Defendant had taken the risk that the patent would not be granted by the trial date when the threats were made.
Mr Justice Arnold considered that because the grant of the patent was imminent, the adjournment was fully justified. Mr Justice Arnold noted that he entirely agreed with the decision of His Honour Judge Hacon.
If the adjournment was not allowed, a consequence would be that the First and Second Claimant won the threats claim by default – even though the First and Second Defendant would have been in a position to raise a defence of justification only a week after the trial.
What Could Happen Next?
If a party threatens infringement proceedings on the basis of a pending patent application, it does so at its own risk. The party that makes a threat may not be able to raise a defence that the threat was justified if the trial takes place before the patent is granted.
This case provides an example of an exception to the above approach. If the patent is not actually granted, it does not necessarily mean it is the end for a defendant. However, the final form of the patent claims which will be granted were fixed at the time the adjournment was ordered. This case provides one of the circumstances when a Court may adjourn a trial if the patent has not been granted by the trial date.
Interestingly, in his Judgment, Mr Justice Arnold considered a circumstance which was not before Laddie J in Brain (No.2) – the availability (and existence) of an interim injunction.
As noted by Mr Justice Arnold, if a claimant is protected by an interim injunction then “in most cases it should not be prejudiced by a delay in the trial of the issue of justification until the patent is granted.”
It will now be interesting to see how this area develops. Is there the potential for the Court to distinguish Brain (No.2) and take a new approach? If a claim is issued relating to threats based on a patent application and the Court orders an interim injunction and there is no prejudice to either party, then should any trial of the threats claim be adjourned until the patent is granted?
This approach provides the party that feels aggrieved by the threats the protection for their business which is often the reason the claim has been issued in the first place. It also still allows the party that made the threat to defend the claim based on justification.
It also avoids a situation that could lead to a party being liable in a threats claim by default – for example, the party ran out of time for the patent to be granted due to the trial date. In such circumstances, if and when the patent is finally granted, the patent owner has been denied the opportunity to put forward a justification defence. It also avoids a further unwanted situation. A patent owner could potentially bring an infringement claim, when a patent has been granted, for the acts it threatens against – even though the patent owner is deemed liable for unjustified threats by default.
Side Note
A separate element to this claim was a claim by the First Defendant for unpaid royalties and a claim by the First Claimant for misrepresentation relating to a licence agreement entered into between the parties.
DTM successfully obtained Judgment for the First Defendant for the unpaid royalties and the misrepresentation claim was dismissed at trial in December 2015 (Global Flood Defence Systems Ltd and another v Johann Van Den Noort Beheer BV and others [2016] EWHC 99 (IPEC), 01 February 2016).
His Honour Judge Hacon found that if any misrepresentation did exist it was negated in any event by the express wording in the operative clause of the licence agreement. This case provides useful guidance in relation to misrepresentation claims and how post-contractual discussions/representations can be negated by the final contract.
If you have any queries about intellectual property disputes, please contact Jim Morris or Richard Harris on 0151 321 000.
