Congress dinner - October 2012:
The Rt. Hon. Lord Justice Kitchin

The following text is taken from the October 2012 issue of the CIPA Journal. If you would like to subscribe to the Journal please send us an e-mail.

Ed.: The 2012 CIPA Congress was one of the very best in my memory. Under the aegis of your new Editor there will be reports of its proceedings. But to whet your appetite, and having regard to its great topicality, the after-dinner speech of our guest of honour, Kitchin LJ, is set out below, with warm thanks to him for making it available so promptly.

Mr President, ladies and gentlemen,

It is a very great honour and pleasure for me to be invited to come and speak to you after this splendid dinner.

This is the bicentenary of the birth of Charles Dickens. He was born in Portsmouth on 12 February 1812 and throughout his life had a deep interest in the law. In fact he joined the Middle Temple in 1839, though he ate few of the dinners, plainly not as delicious as this evenings fare, and he was never called to the Bar. But he knew many lawyers and we know he did not have an altogether favourable view of them, or, for that matter, of government institutions, including patent offices:

“The Circumlocution Office was (as everybody knows without being told) the most important Department under Government. No public business of any kind could possibly be done at any time without the acquiescence of the Circumlocution Office. Its finger was in the largest public pie, and in the smallest public tart. It was equally impossible to do the plainest right and to undo the plainest wrong without the express authority of the Circumlocution Office.

This was the office to which Arthur Clennam travelled to enquire about William Dorit’s debt and, while there, discovered the struggling inventor Daniel Doyce who had ventured into the hands of Mr Tight Barnacle and his son Barnacle junior in the patent department:

“There I was undoubtedly made to feel”, said Mr Doyce, “as if I had committed an offence in dancing attendance at the various offices. I was always treated more or less as if it was a very bad offence. I have frequently found it necessary to reflect, for my own self-support, that I really had not done anything to bring myself into the Newgate calendar but only wanted to effect a great saving and a great improvement.”

So poor Mr Doyce felt like a troublesome convict and he was certainly at risk of being broken alive on the wheel by the Barnacle family.

As for the High Court of Chancery, Dickens describes implacable November weather with fog everywhere. At the very heart of the fog was Lincolns Inn Hall where the Lord High Chancellor sat in all his foggy glory. This was the court which

“so exhausts finances, patience, courage hope; so overthrows the brain and breaks the heart; that there is not an honourable man among its practitioners, who would not give - who does not often give - the warning ‘Suffer any wrong that can be done you, rather than come here!’”

And the law itself – well, thought Dickens, the one great principle of English law was to make business for itself. Repealing a statute? Why, that could never be done. It might have the effect of sweeping away a class of practitioners like Mr Vholes, and that the social system could not afford. And so the protracted cause of Jarndyce v Jarndyce pressed on, and upon it was expended study, ability, eloquence, knowledge, intellect, even high intellect, making it a monument of Chancery practice, until the whole estate was gone.

Nor was Dickens limited to his imaginings. He himself brought a copyright claim in Chancery over A Christmas Carol. He issued proceedings in 1844 and secured a judgment but never recovered any costs or damages – the pirates went bankrupt.

Fortunately so many of the aspects of the law satirised by Dickens have long since been swept away. Important reforms recommended by Lord Woolf were embodied in the Civil Procedure Rules and introduced in 1999. Their fundamental purpose is to provide litigants and the courts with a guide or compass for the just resolution of disputes. It is encapsulated in the overriding objective and includes so far as practicable ensuring the parties are on an equal footing; dealing with the case in ways which are proportionate; ensuring the case is dealt with expeditiously and fairly and allotting to it an appropriate share of the court’s resources.

A patent action no longer takes years to come to court, as it did when I was called to the Bar in the late 1970s. Nor does it last for weeks and weeks in court. I well recall leading counsel opening the case to the judge and reading the patent out loud from beginning to end. And the same was done with the discovery. Not surprisingly the opening went on for days. A clerk would hand round a menu from a local restaurant during the morning and the solicitors and barristers would order what they wanted for lunch!

That is to say nothing of cross-examinations. These seemed - indeed were - interminable. As was said of one barrister, he was like Christopher Columbus. When he started off he had no idea where he was going; when he arrived he had no idea where he was; and when he returned, he had no idea where he had been.

By contrast, and since the Woolf reforms, a trial in the High Court is now likely to be heard within a year from the date of issue and possibly a good deal sooner. Disclosure is limited, experiments are carefully controlled and expert reports and witness statements exchanged in good time before trial. Skeleton arguments mean that opening and closing speeches are short and time for cross-examination may be limited. Even a substantial case is now unlikely to take more than five days in court.

But costs can still be very high. Just think of RIM’s costs of nearly £6m for a five-day trial against Visto over the BlackBerry®. Abbott’s costs of £2.6m in its action against Evysio are just two examples, and they are from four years ago.

Interestingly, these costs did not meet with universal condemnation. Comments on the report of the RIM case in legal magazines included:

Floyd J is out of touch if he thinks the solicitors’ costs are unrealistic.”

“Lawyers are paid by the hour and after 15 months of pre-trial work the fees are unsurprisingly large…”

“I would rather pay £5m and win than £1m and lose”

“You don’t win major litigation by counting the pennies”

But I don’t think Floyd J was out of touch. And costs of this order were plainly out of the reach of SMEs. Something needed to be done. And it has been done – and it has been a resounding success.

I refer of course to the reform of the Patents County Court. Its new procedure is radically different from that adopted in any equivalent forum – and it may prove to be a model for other litigation in this country. Its key elements are now familiar: full statements of case; a default position of no disclosure or cross-examination; active case management to ensure that any disclosure or cross-examination is directed to specific identified issues and the cap on recoverable costs set at £50k for a determination of liability – I would emphasise of infringement and validity. This costs cap is of particular importance. It is designed to give SMEs the ability and confidence to litigate without facing an open-ended liability; it is also designed to give a fair measure of recovery.

The court is already extremely busy - it is estimated at least 50% more cases are being issued - and increasingly so; and the evidence is that it is attracting cases that would not previously have been litigated, particularly patent cases.

And that is not the end of the story – a small claims track started on 1 October with a claim limit of £5000 and very tight restrictions on any costs recovery – its District Judges and Deputy District Judges are already in place.

So where are we now? Professor Sir Hugh Laddie said of the Woolf reforms – “You can’t change a dog into a cat by calling it Kitty.” I agree. But I think even he would have been pleasantly surprised by all these new procedures.

Of course I recognise that the current UK system still has its defects – most notably that whichever route a UK inventor takes to secure protection he will end up with national rights which he has to enforce in the national courts of different Member States. This can be costly and there is a risk of inconsistent decisions – an issue which I know has been the subject of a number of the sessions today. Some kind of unitary patent and unified patent court has therefore been thought desirable for very many years. It has been said that a single unitary patent will reduce by up to 80% the translation and related costs for obtaining patent protection in the EU. Clearly if this were true it would benefit business, and particularly SMEs, enormously.

On the other hand, we now have a system which serves businesses and disputes of all sizes. It has specialist judges and gives businesses what they want: a relatively quick decision – indeed generally quicker than any other EU jurisdiction. It also generates a huge amount of business for the UK. The Rolls Building has been opened with a fanfare of publicity promoting London as a world leading centre for state of the art international dispute resolution. Patent litigation is an integral part of the work done there. It has been estimated that the annual spend on patent litigation and advisory services in the UK is at least £100m. I think this is very conservative and the true figure is probably an order of magnitude greater. So I strongly believe this is not a system we should be rushing to dismantle unless we are confident we are replacing it with something better.

It is therefore hardly surprising that the current proposals for a Unitary Patent and Unified Patent Court have been the subject of such heated debate, and it is a debate in which I know this Institute has played a very active and effective role.

I have to say I have very great concerns at the speed with which the proposals have been moved forward over the last 12 months under first the Polish and then the Danish Presidencies. Indeed they seem to have gathered a momentum quite divorced from the concerns of the users, professionals and the judges, culminating in the agreement between EU leaders at the Council meeting on 29 June.

But I also have serious concerns about the proposals themselves. A UK SME with a trade across the EU may find himself before the Local Division of any Member State into which his goods have been sold and facing the prospect of a pan-European injunction. He decides to counterclaim. But instead of having his counterclaim dealt with by that court, he may find himself directed to the Central Division. Now he might suppose that to be in Paris, the main seat of the Central Division. But he would be wrong because the Central Division has regional sections, one in Munich and one London. So he must decide to which of those he must go - not necessarily a straightforward matter. And if he loses in the Local Division or the Central Division, wherever that may be, he must appeal. And for that he must go to yet another country, Luxembourg. So to protect his main UK business he may have to fight in three different jurisdictions. A modern circumlocution office - I wonder what Charles Dickens would have made of that.

But more fundamentally, this structure contemplates the routine separation of infringement and validity, so-called bifurcation. It happens already in Germany where the practice arose for jurisdictional reasons arising from Germany’s federal nature. But whatever its origins, there can be no doubt that German opinion is generally in favour of bifurcation now. Some local divisions will follow the German practice and so provide the patentee with a significant commercial advantage. He may secure his injunction before the validity of his patent has ever properly been tested. Now it is true that a defendant can go on and try to have the patent revoked. But in the meantime his product is off the market and he may well never be able to reintroduce it. Commercially, it is finished. For just this reason we often see that defendants who are injuncted at the interim stage do not take a case through to full trial.

Bifurcation may have a further important consequence. Some local divisions will adopt this practice more than others. If they do then, naturally, they will become popular with patentees. This will in turn encourage forum-shopping. And it will be forum-shopping of a very dangerous kind for business – shopping for those courts most likely to grant pan-European injunctions on weak patents. A much better solution, in my view, would be to have a single court without central and regional or local divisions but to allow it to sit locally when convenient.

I have other grave concerns too. One is the inclusion in the Regulation of provisions relating to the substantive law of infringement – Articles 6-8. Our Government has resolutely opposed the inclusion of these provisions and it seems likely that opposition underpinned the suggestion by the Council at the meeting on 29 June that they be deleted. But the matter is far from settled. In July the European Parliament refused to accept the suggestion – indeed it resulted in some fiery exchanges with one rapporteur describing it as “a scandalous breach of procedure”, adding that the haggling resembled an “oriental bazaar”; and another that the deletion would “emasculate” the proposals.

Such a reaction is regrettable given that objection to the inclusion of these Articles is both uniform and soundly based. They are unnecessary and would likely result in a series of references to the CJEU on issues of infringement. I believe references on validity would likely be made too, because one cannot infringe an invalid patent. Such references would inevitably introduce further expense and substantial delay – commonly two years, and sometimes considerably more. And perhaps even worse, the CJEU has no real patent expertise and its track record in IP cases does not inspire confidence.

One need look no further than two of its most recent decisions. Brüstle concerned the prohibition in Article 6 of the Biotech Directive against patents for inventions which are contrary to morality. An astonishing decision and one which is already affecting research in this country – because of its impact on funding.

Medeva is not much better. It concerned the interpretation of Article 3 of the SPC Regulation and has left the law so unclear that further references, costs and delays are inevitable.

Another concern is that very little consideration has been give to other fundamental issues and the practical considerations of how to set up and administer the courts. Three judges will be sitting on every case at first instance and five on appeal. How are they to be selected and trained? How will they retain their independence? And most importantly, how much will it cost to fight a case? What will the costs exposure of the losing party be? How is the liability for third parties – accessory liability - to be determined? None of these questions has been answered. And I can identify many others.

It is said this court will be up and running in 2014. Now it is all very well to say that there will be a long transitional period during which patentees may opt in or out. But that is not the case for defendants. They will have no escape route. Will SMEs be able to cope with this new system or will their businesses be broken at the wheel? Will the new court be obliged to make references to the CJEU? And if it does, what will happen if similar points arise in proceedings under the current national systems. Will we be asked to stay them?

So I urge industry to make its views known and I urge the Government not to reach any agreement or rush into ratification until it is truly satisfied the new system will be better than what we have now.

At the same time we must recognise that these are challenging times and our systems must continue to develop or we will be left behind. Indeed, Lord Neuberger has said those embarking on a legal career are doing so at a time when the legal profession is undergoing its greatest period of change in 100 years. The same applies to patent attorneys. We now have the possibility of alternative business structures – an area in which I know this Institute has again played a very active role - and we read of “Eddie Stobart” legal services and “Tesco” law.

So if the proposals for a Unified Patent Court are to proceed I believe we must continue to participate. We must fight to improve the proposals and make them work. As this glorious summer has shown, there will be occasions when Boris Johnson gets stuck on his zipwire, but gloomsquirts and sceptics can be confounded. We have shown we can make long and complex projects come good and can bring a shower of gold to London. Our neighbours have suggested we use “magic wheels”. But I am confident that no-one is better equipped with “specially round ones” and in all other ways to tackle the tasks and grasp the opportunities ahead than the Members of this Institute.

Thank you

[Ed.: Lord Justice Kitchin’s criticisms of the UPC, trenchant though they are, will seem quite restrained if you now read what follows below...].

Click here to see 12 reasons for concern for the Unitary Patent.