Now You See It, Now You Don’t: Patent Litigation After Virgin v Zodiac

In one of the most keenly observed United Kingdom patent lawsuits in recent memory, Virgin Atlantic Airways Limited v Zodiac Seats UK Limited, the European Patent Office (“EPO”) and the UK Supreme Court (“UKSC”) have performed what may be construed as a precedent-setting disappearing act.

Facts and Findings

In 2007, Virgin Atlantic Airways Limited (“Virgin”) began proceedings against Zodiac Seats UK Limited (“Zodiac”) to recover damages exceeding £49 million (roughly $775 million CAD).  The English courts held that Virgin’s patent was valid and had been infringed.  Subsequently, the EPO found the infringed claims were invalid by reason of prior art and accepted proposed amendments by Virgin to remove these claims from the patent. As such, following the amendment, Zodiac argued that it no longer owned the sum alleged by Virgin, or any sum at all, as the registered version of the patent was no longer valid.  As the issue was put forth by the Court: “The fundamental question is whether Zodiac is entitled to contend upon the enquiry as to damages that there have been no damages because the patent has been retrospectively amended so as to remove the claims held to have been infringed” (Lord Sumption at para 16). 


In short, Zodiac argued that, following the EPO’s decision, Virgin was claiming infringement of patent claims that no longer existed.  At the Court of Appeal, the reasons cited a long line of case law (including Coflexip SA v Stolt Offshore MS Ltd (No 2) and Unilin Beheer BV v Berry Floor NV) in order to apply the principle of res judicata. By doing so, that court found that, notwithstanding the retroactive effect of the Technical Board of Appeal’s (“TBA”) finding, the same parties and/or their privies were estopped from re-litigating the same cause of action (i.e. cause of estoppel) or issue (i.e. issue estoppel), in the interest of fairness and efficiency.


To even the casual observer, it is not surprising that one party may not claim a patent infringement against another in any jurisdiction if said patent does not exist.  Indeed, it seems that such a claim would be frivolous and baseless.


Now, here’s the twist. Under the authority granted to the EPO, per the European Patent Convention (“EPC”), a patent that is valid today may be held to be invalid a number of years down the line, as was the case with Virgin’s patent.  As such, a finding by the TBA that a patent is invalid operates both retroactively and prospectively for all UK patents.  In the UK, the provisions of the EPC are given effect in the Patent Act 1977. Due to the legal regimes related to these entities, the EPO and the UK courts manifest “parallel jurisdiction” with respect to the statutory and normative framework governing patents. 


In Virgin v Zodiac, the UKSC held that Virgin’s patent on airplane seats, which was approved in 2007, is to be considered invalid retroactively, from the day it was registered, thus rendering any claims for damages from infringement on that specific patent baseless.  Relying on the statutory framework governing patents, the UKSC held that Virgin’s alleged patent, in its previously registered manifestation, had been deemed to have never existed by the TBA and thus could not be infringed: “The revocation of the patent deprived the patentee of the rights which the patent had bestowed on him as against the world; furthermore, it did so retrospectively. In other words, the effect of the revocation was that everyone was entitled to conduct their affairs as if the patent never existed” (Lord Neuberger at para 49).


Impact

In Canada, the Patent Act governs the issuance and validity of patents.  Furthermore, patents issued under Canadian jurisdiction are not subject to parallel jurisdiction, contrary to the Virgin v Zodiac litigation.  As such, it is unlikely, in my opinion, that the decision will have a significant impact on the strategy and timelines relevant to Canadian patent litigation.


In the UK, however, current and future litigants with applications for both the court and the EPO will likely need to revise their strategy following the Virgin v Zodiac decision.  Specifically, plaintiffs alleging patent infringement may need to tread carefully with respect to temporary injunctions.  Generally, EPO hearings take years, while court cases are resolved between 12-18 months, with additional time for potential appeals.  As such, if a plaintiff requests a temporary injunction pending an EPO case, the defendant is more likely to go out of business before a plaintiff can even collect damages, as the defendant will be unable to profit from the process or product upon which the patent is based.  Furthermore, from the perspective of courts and regulators, the disconnect between EPO hearings and court proceedings will likely need to be addressed to prevent conflicting holdings in the future.


That said, the Supreme Court by applying an EPO decision to overrule a Court of Appeal holding has, in my opinion, set a clear precedent with respect to how conflicting decisions in co-pending EPO and court proceedings should be undertaken in the future. Some have criticized this precedent as being a waste of resources to have rulings by qualified patent judges overturned when in conflict with decisions from the EPO, as the latter undertakes a significantly less rigorous investigation with respect to the law and facts of a case than judges do.


It is unclear as to how the EPO’s involvement in patent disputes improves or facilitates resolution.  In my opinion, a potential solution may be to simply eliminate the parallel jurisdiction held by the courts and the EPO, leaving the UK courts to interpret the statutory framework and international norms governing patent infringement.  Such an approach would facilitate access to justice, fairness and efficiency –the triumvirate of principles underlying a reasoned approach to legal resolution.

Ying Cheng is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.

One Comment
  1. The UKSC’s main point was to overrule the much criticized 1908 English CA decision in Poulton. (For typical criticism, see Vaver, Intellectual Property Law, 2nd ed. (2011) at 603-605 (“Effect of Expungement on Earlier Judgment”)). This overruling will have more impact on Canadian law than this comment suggests. Contrary to what Poulton previously had held, the expungement of a Canadian patent for initial invalidity will now absolve a defendant who has previously been held liable for infringement from paying damages or an account of profits where those have not yet been assessed, and may require any injunction against infringement to be dissolved. Poulton’s case held that such a defendant would still be liable for such damages; that is no longer the case. A defendant who has paid damages or an account on such a later invalidated patent may now also possibly be able to reopen the case and ask for its money back – a point that the UKSC averted to but did not decide. Since infringement damages or accounts of profits may potentially be enormous, such restitutionary claims may become a growth industry in Canada and elsewhere.

    Poulton’s case has also been relied on in Canada in NOC proceedings involving generic pharmaceuticals. The UKSC decision may cause that reliance to be reconsidered.

Leave a reply

Your email address will not be published. Required fields are marked *

one × 5 =