Stays of UK patent proceedings:revised guidance

While there are isolated examples of stays in the UK, these have been rare. The accepted position was always essentially that because opposition is so slow, stays were never appropriate. This position is bolstered by the fact that preliminary injunctions are hard to get in UK patent cases.

Since the EPO began expediting oppositions however, stay applications have become more common, despite the fact that the sequential approach to decision making in the EPO means even expedited proceedings can take several years longer than the UK. To provide a framework for such stay applications, in 2008 the Court of Appeal issued guidance in Glaxo Group Ltd v Genentech Inc [2008] EWCA Civ 23. In Glaxo, the court set out several considerations that were relevant to the exercise of the court’s discretion, the key ones summarized as follows:

1. The court’s (very wide) discretion to stay should be exercised to achieve the balance of justice between the parties.
2. The possibility of duplication of proceedings is inherent in the system and is contemplated by the legislation; duplication per se is not a ground for a stay.
3. The main factor affecting discretion is the length of time the respective proceedings will take to achieve some certainty for the parties. If the court will achieve this significantly before the EPO, generally a stay should be declined.
4. Assertions by a party that it has commercial need to resist a stay carry weight, whereas equivalent denials by the other party should be viewed with suspicion.
5. Other factors, such as increased costs, are relevant but of lesser importance.

Most applications for a stay have since been refused. The main circumstance in which a stay is more likely is where a final decision at the EPO is imminent. Interestingly, this is reflected in Article 33(10) of the Unified Patent Court Agreement, which provides: “The Court may stay its proceedings when a rapid decision may be expected from the European Patent Office”.

What Glaxo didn’t address were the consequences of divergent decisions in the UK and the EPO. The most troubling consequence arises where the court finds a patent valid and infringed, and then awards damages. If the EPO later revokes or narrows the patent, what happens to those damages?

This has caused much discussion in the UK and the position until recently was perhaps not as one might expect. In the somewhat controversial decision in Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] EWCA Civ 213, the Court of Appeal (in a majority decision) held that the defendant was estopped from relying on the later revocation of the UK patent in the damages enquiry, and remained liable in damages.

In Unilin Beheer BV v Berry Floor and others [2007] EWCA Civ 364, the Court of Appeal similarly found that the defendants, having lost on liability, were estopped from relying in the damages enquiry on any subsequent revocation or limitation of the patent at the EPO, because the issue of liability was res judicata between the parties.

The same basic question went to the UK Supreme Court in July this year in Virgin Atlantic Airways Limited v Zodiac Seats UK Limited [2013] UKSC 46. The Supreme Court fundamentally altered the position. The court considered that both Coflexip and Unilin were wrongly decided, and held that defendants can rely on a subsequent revocation or limitation of the patent in issue in a damages enquiry. However, the court indicated that it might be different if the enquiry had concluded and a sum of damages already awarded.

Perhaps concerned by this last point, the Supreme Court invited the lower courts to re-examine the Glaxo guidance. That re-examination has just been done in IPCom GmbH & Co KG v HTC Europe Co Limited and others [2013] EWCA Civ 1496.

Much of the original guidance remains but the court did make some important alterations and additions, summarised as follows:

1. The default position should be a stay, absent other factors.
2. The party resisting a stay has the burden of showing why it should not be granted.
3. If the refusal of a stay might deny a party the benefit of the results of both proceedings, then there should be a stay. Specifically, if the refusal could lead to the patentee obtaining money that is non-repayable, that is a strong factor for a stay. However, that can be mitigated through suitable undertakings to repay.
4. The fact that resolution of national proceedings might promote settlement should be taken into account.
5. Mere delay of itself is not a reason to stay: it is the prejudice to a party either way that matters.
6. The public interest surrounding the validity (or otherwise) of the patent should be considered.

While the burden has shifted to the party resisting a stay, and delay is not a factorper se, our view is that in practice the position is not much changed. The UK courts have long been concerned about excessive delay in EPO oppositions, even with expedition. Unless and until that changes, the court is likely to favour some certainty sooner rather than finality much later. If a party can show prejudice from a stay, as well as a commercial need to reach a final resolution before the EPO decision (assuming that that is some way off), then provided suitable undertakings are offered to cover the concern expressed in Virgin, we think the Court will refuse a stay. In IPCom, the patentee offered undertakings, and the stay was refused.