Damages Payable on Invalid Patent - International Law Office

Background
Decision
Comment

On July 31 2003 the High Court refused to stay an inquiry as to damages for patent infringement, despite the fact that the patent in question was held invalid in a subsequent action.

Background

On July 31 2000 the Court of Appeal upheld a judgment of the High Court that the Coflexip patent was valid and infringed by Stolt. An inquiry as to damages was ordered and Stolt's petition for leave to appeal the decision of the Court of Appeal was dismissed. The inquiry has been fixed for a hearing in April 2004, and Coflexip is claiming between £50 million and £70 million, plus interest.

Following Coflexip's success against Stolt, a third party obtained an order for revocation of the same Coflexip patent, basing its case on prior art that had not been relied on by Stolt. The revocation order was stayed pending Coflexip's appeal.

Stolt sought a stay of the inquiry on the basis that there was a court order that the patent in question be revoked. It was common ground between the parties that a revocation relates back to the date of grant of the patent. Stolt argued that it would be unfair if it had to pay an enormous sum in respect of a violation of a right that was held never to have existed.

Coflexip, relying on the Court of Appeal decision of Poulton v Adjustable Cover & Boiler Block Co (1908) 25 RPC 529, countered that, even if the patent had been revoked, Stolt was nonetheless prevented by the common law concept of estoppel from raising issues of validity and infringement again. Final judgment had been obtained by Coflexip against Stolt, making the matter of the infringement and validity of the patent res judicata (ie, finally decided) as between those parties. Stolt was therefore not allowed to reopen these questions, even though the patent had subsequently been held invalid.

Decision

The judge, citing Poulton, agreed with Coflexip's arguments and held that Stolt was bound by the rule of action estoppel. As such, the fact that the patent had subsequently been revoked did not affect the questions of infringement and validity between the parties which had already been determined by the court. The judge therefore refused to grant the stay requested.

Comment

It may seem harsh that a party must pay damages in respect of the infringement of a patent that was never valid. However, the policy reason behind the doctrine of action estoppel - namely that an action between two parties should not be re-litigated - is an important one.

The judge reasoned that without such an approach, unsuccessful defendants in patent infringement actions would try to dig up better prior art and encourage third parties to attack the patent in order to give themselves an opportunity to re-litigate its validity and avoid paying damages for infringement. It would also be undesirable if a patentee had to account for damages received from previous infringement actions if the patent in suit were subsequently held to be invalid. It remains to be seen whether the Court of Appeal agrees with the approach.

However, it appears from the Poulton Case that although damages are still payable, any order for revocation of a patent would in every case put an end to the injunction. Coflexip accepted this position.

For further information on this topic please contact Andrew Rich or Sebastian Moore at Herbert Smith by telephone (+44 20 7374 8000) or by fax (+44 20 7374 0888) or by email (andrew.rich@herbertsmith.com or sebastian.moore@herbertsmith.com).