Zodiac ruling rejects “Unilin principle”

The Supreme Court has rejected the “Unilin principle” in a landmark £49m patents ruling over Virgin Atlantic’s upper class seating system.

Under the principle, once a final court decision of patent infringement has been made the patent holder has a res judicata right to try to recover damages even if the patent is subsequently held to be invalid.

The principle comes from Unilin v Berry Floors [2007] FSR 635 and previous cases dating back to 1908.

However, it has now been rejected by the justices, in Virgin Atlantic Airways v Zodiac Seats UK [2013] UKSC 46.

Virgin wished to recover more than £49m damages for infringement of a European patent. However, the technical board of appeal of the European Patent Office had retrospectively amended it so as to remove from the date of grant all the claims said to have been infringed. Virgin based its case on res judicata since the English courts had held the patent to be valid before the retrospective amendment was made. The Court of Appeal found in Virgin’s favour and appeal was refused.

Delivering the lead judgment, however, Lord Sumption said that cause of action estoppel could not be absolute and that subsequent, unforeseen events could remove the effect of res judicata.

Lord Neuberger said: “The policy of the Patents Act is that valid patents are enforceable against the world, even if an infringer is honestly and reasonably unaware of the existence of the patent.

“Equally, if a patent is revoked (or amended), the policy is that the revocation (or amendment) takes effect retrospectively, and that this can be relied on by the world. I find it hard to see why someone who has failed in an attack on the patent should not be entitled, like anyone else, to rely on the points that the patent has been revoked (or amended), and that the revocation (or amendment) is retrospective in its effect, whether in legal proceedings or in another context.”

Mark Kenrick, partner at Marks & Clerk, says: “This shows the need for technology-led businesses to consider carefully the interactions between parallel proceedings in the EPO and UK courts, when devising an overall strategy to address a particular patent dispute.

“The court expressed dissatisfaction with the English courts’ guidelines for stays of UK proceedings where there are parallel proceedings in the EPO. While the court did not think it was appropriate to modify the guidelines themselves, it seems likely that when an application for a stay because of concurrent EPO proceedings comes before the UK courts, the guidelines will be revisited with this decision very much in mind.

“While the forthcoming Unified Patent Court will have pan-EU jurisdiction for patent validity, it will not, it seems, provide a solution to the recurring problem of how to deal with parallel proceedings in the EPO and the courts charged with patent enforcement. The draft Rules of Procedure for the proposed court do provide for stays of proceedings based upon proceedings in the EPO, but as with many aspects of the UPC, much will depend upon how the rules are actually applied in practice.”