FIRST DIVISION, INNER HOUSE, COURT OF SESSION

Lord President

Lord Macfadyen

Sir David Edward, Q.C.

 

 

 

 

 

A3606/00

OPINION OF THE COURT

delivered by THE LORD PRESIDENT

in

RECLAIMING MOTION

in the cause

ITP SA

Pursuers and Respondents;

against

COFLEXIP STENA OFFSHORE LIMITED

Defenders and Reclaimers:

_______

 

 

Act: C.M. Campbell, Q.C., S.A.L. Wolffe; Simpson & Marwick (Pursuers and Respondents)

Alt: Currie, Q.C., Higgins; Maclay Murray & Spens (Defenders and Reclaimers)

19 November 2004

Introduction

[1] This reclaiming motion was heard in unusual circumstances. The pursuers sued the defenders for infringement of a European patent EP 0 890 056 B1 which they had been granted on 1 March 2000 with a priority date of 29 March 1996. The patent had been validated in the United Kingdom on 22 March 2000. The patent related, in general terms, to a heat insulated pipe-in-pipe assembly for use in pipelines to be laid on the seabed for the purpose of transporting oil products.

[2] On 26 August 2003, following a three week proof, the Lord Ordinary held that the patent was valid, rejecting the defenders' case that it lacked novelty and was obvious, and found that the patent had been infringed by the defenders. He granted interdict against the defenders from infringing the patent, and continued the case for an inquiry into the pursuers' claim for an accounting for profits. The defenders reclaimed against the interlocutor of the Lord Ordinary, initially on grounds relating to the issues on which they had been unsuccessful. However, the reclaiming motion took a different turn as a result of the following events.

[3] On 17 February 2004 a Board of Appeal of the European Patent Office annulled a decision of the Opposition Division of the European Patent Office dated 6 August 2002 in which it had rejected opposition to the granting of the patent, and revoked the patent on the ground that it was obvious having regard to the prior art. Thereafter the pursuers requested that the ruling of the Board of Appeal should be reviewed on the ground that the appeal procedure had been fundamentally flawed, and that the case should be re-heard before another court. On 29 March 2004 the Board of Appeal rejected this request as being inadmissible. The pursuers also received a letter of the same date from the Vice President of the European Patent Office to the same effect.

[4] On 26 May 2004 counsel for the pursuers informed the court that they had made an application to the European Court of Human Rights (ECtHR) in respect of the proceedings before the Board of Appeal. The application had been lodged on 19 May 2004. Counsel stated that it was their intention to seek a sist of the reclaiming motion. The case was continued for a hearing by order on 15 June 2004, when counsel for the pursuers referred to the application to the ECtHR and moved the court to sist the reclaiming motion. The court refused the motion. The defenders were permitted to lodge an additional ground of appeal in which they maintained that, as a consequence of its revocation, the patent fell to be regarded as void ab initio, and accordingly that the defenders could not have infringed it. A motion by the defenders for recall of the interdict was granted unopposed.

[5] On 15 September 2004 the case was put out again by order at the request of the defenders. On that occasion they withdrew all of the grounds of appeal with the exception of the additional ground to which we have referred. A second motion by the pursuers to sist the reclaiming motion was refused.

The pursuers' application to the European Court of Human Rights

[6] The pursuers claimed in the application that their rights under Articles 6(1) and 13 of the European Convention on Human Rights, and Article 1 of the Protocol to the Convention of 20 March 1952 had been violated. This was due to the decision of the Board of Appeal to revoke the patent, which was a property right, immediately, without the pursuers having (i) any right to be heard concerning whether the conditions for immediate revocation had been met, and (ii) any means of contesting the loss of their property right or the various alleged procedural irregularities. The pursuers complained, inter alia, that the decision of the Board of Appeal had been based on a number of documents which had not been taken into account by the Opposition Division, including a patent and an affidavit which had not been submitted to that Division. It had also based its decision on new arguments which had not been considered by the Opposition Division. It was also maintained that the Board of Appeal had acted as an administrative body making a decision at first instance, against which there was no recourse, to deprive the pursuers of their property right. Its decision did not constitute a review of the reasoning of the first instance decision but was a wholly new decision. The Board had not given any "special reasons" for not remitting the case to the Opposition Division, despite the terms of Article 10 of the Rules of Procedure of the Boards of Appeal which stated:

"A Board shall remit a case to the department of first instance if fundamental deficiencies are apparent in the first instance proceedings unless special reasons present themselves for doing otherwise".

[7] The pursuers' application was directed against the Federal Republic of Germany on the basis that there was an absence of means of recourse against an administrative decision which had been taken by the Board of Appeal. The European Patent Organisation, of which the European Patent Office was part, benefited from its diplomatic immunity in Germany where it was situated. Reference was made to Article 3 of the Protocol on Principles and Immunities of the European Patent Organisation dated 5 October 1973, and Article 3 of the Headquarters Agreement dated 19 October 1977 between the Federal Republic and the Organisation. As a consequence of that immunity the decision of the Board of Appeal could not be challenged before the German courts. In entering into the agreements which allowed the Organisation to operate in its territory, Germany had violated its obligations under the European Convention on Human Rights.

[8] The pursuers referred to the decision G1/97 of the Enlarged Board of Appeal, which drew attention to fundamental flaws in the procedures of the European Patent Office and called on the legislature to provide for the possibility of reviewing final decisions of Boards of Appeal in specific clearly defined cases where a serious violation of a fundamental procedural principle had occurred. In their application the pursuers sought a judgment by the ECtHR that its civil rights under the Articles referred to had been violated. The pursuers stated that they hoped

"that a friendly settlement may be attained in such a way that a means will be found by the Federal Republic of Germany to ensure that its rights be restored, and that it be granted a fair hearing, as a means of recourse, as contemplated in Articles 6(1) and 13 of the Convention and Article 1 of the Protocol of the Convention, of March 20, 1952, concerning an administrative decision which has been taken for the first time and which has deprived of a property right. To the extent necessary, ITP seeks just satisfaction, in the sense of article 41 of the Convention, for any injury which it may suffer as a result of violation of its rights".

Proceedings under the European Patent Convention

[9] The European Patent Convention of 5 October 1973 established a European Patent Organisation with its own European Patent Office, situated in Munich, for the granting of European patents under the system of law set out in the Patent Convention. Under that system a patent application must designate in which of the contracting states of the Convention patent protection is desired and if, after the examination by the European Patent Office, the application is accepted, a European patent is granted for each of the designated States. In accordance with Article 2 of the Patent Convention a European patent is to be treated in the State for which it is granted as having

"the effect of and be subject to the same conditions as a national patent granted by that state, unless otherwise provided in this Convention".

In accordance with that provision section 77(1) of the Patents Act 1977 states that any European patent granted for the United Kingdom (a "European patent (U.K.)") is to be treated as if it were a patent granted under the Act.

[10] Article 64(1) of the Patent Convention provides, subject to a proviso which is not relevant for present purposes, that a European patent is to confer on its proprietor from the date of publication of the mention of its grant, in each contracting State in respect of which it is granted, the same rights as would be conferred by a national patent granted in that State. Article 67(1) states that a European patent application, from the date of its publication, is to confer upon the applicant provisionally such protection as is conferred by Article 64 in the contracting States designated in the application as published. However, these rights are subject to Article 68 which provides:

"The European patent application and the resulting patent shall be deemed not to have had, as from the outset, the effects specified in Articles 64 and 67, to the extent that the patent has been revoked in opposition proceedings".

Section 77(4A) of the Patents Act states:

"Where a European patent (U.K.) is revoked in accordance with the European Patent Convention, the patent shall be treated for the purposes of Parts I and II of this Act as having been revoked under this Act"

[11] The Patent Convention makes provision as to the procedure by which, and the grounds on which, a European patent may be revoked by the Opposition Division of the European Patent Office. In terms of Article 106 the decision of the Opposition Division is subject to appeal to the Board of Appeal. Article 111(1) provides:

"Following the examination as to the allowability of the appeal, the Board of Appeal shall decide on the appeal. The Board of Appeal may either exercise any power within the competence of the department which was responsible for the decision appealed or remit the case to that department for further prosecution"

[12] It is not in dispute that, so far as the Patent Convention is concerned, the decisions of a Board of Appeal are not subject to any further appeal or review. It may be noted that Article 112 enables questions or points of law to be referred to the Enlarged Board of Appeal. However, this has no bearing on the present case.

Submissions in the hearing of the reclaiming motion

[13] Counsel for the defenders took his stand on section 77(4A) of the Patents Act. He submitted that the court must recognise the effect of the revocation of the patent by the Board of Appeal. Accordingly the court should give effect to the additional ground of appeal and grant the reclaiming motion.

[14] Counsel for the pursuers initially moved the court to refuse the reclaiming motion in hoc statu, but thereafter concentrated on moving the court to sist the reclaiming motion to await the outcome of the decision of the ECtHR on the admissibility of the pursuers' application. It was anticipated that this decision might be given in about a year's time.

[15] Counsel for the pursuers submitted that the court was not obliged to grant the reclaiming motion. That was not required by the Patents Act, either expressly or by necessary implication. The court had the power to sist the reclaiming motion, and should exercise that power where this was appropriate.

[16] Counsel referred to the rule of interpretation in section 3 of the Human Rights Act 1998, which was discussed by the House of Lords in Ghaidan v Mendoza [2004] 3 W.L.R 113. The terms of section 77(4A) should be read down so as to be qualified by the words "unless to do so would be contrary to any Convention right", or words to a similar effect. This could be done without cutting down the fundamental features of the Patents Act. The rule of interpretation in section 3 prevailed over the terms of the Patent Convention. Moreover, the interpretation of the effect of the Patent Convention was a matter for the domestic court.

[17] It was not maintained that this court could competently review the decision of the Board of Appeal. However, it was for this court to determine whether effect should be given to that decision. For this purpose it had to take account of the pursuers' Convention rights before the Board of Appeal. It would be contrary to section 6 of the Human Rights Act for this court to give effect to a decision which had been reached in a manner which was not compliant with the Convention. The pursuers had raised the question of the violation of their Convention rights in the only available forum, which was the ECtHR. If their application was held to be admissible, it was an open question as to whether their Convention rights had been breached by the Board of Appeal. If the application was well-founded, recall of the interlocutor of the Lord Ordinary and granting decree in favour of the defenders would be inconsistent with those rights, and would constitute a further infringement of them. The court was not being invited at this stage to determine for itself whether there had been such a violation. For the present it was sufficient to say that there were serious questions as to whether the procedure had contravened the pursuers' Convention rights in one or more respects.. It was sufficient if the court recognised the existence of these questions. There were no pressing factors of prejudice or other competing considerations which made it imperative that the reclaiming motion should be determined at this stage. For the court to refrain from doing so would be fairer and more consistent with the pursuers' Convention rights and the Human Rights Act. It was accepted that, if the ECtHR decided that the pursuers' application was admissible, there would be arguments against any further sist. However, at that stage the court could form its own view as to whether or not the pursuers' Convention rights had been infringed.

[18] Counsel for the pursuers also maintained that the protection which they were seeking was limited in its scope. The pursuers were not asking the court to review the decision of the Board of Appeal, or to prevent the recognition in the United Kingdom or other countries of the revocation of the patent. The sisting of the reclaiming motion would not affect the rights of third parties or the patents register. It would simply preserve the status quo in a private litigation between the pursuers and the defenders. The pursuers were seeking to do no more than was appropriate to vindicate their Convention rights by preserving, as between them and the defenders, the decision of the Lord Ordinary who was the sole tribunal which had acted in a way which was compliant with the Convention. The defenders were no longer affected by interdict. The pursuers were particularly concerned with preserving the Lord Ordinary's determination of the defenders' liability, which had preceded the revocation of the patent.

[19] If the ECtHR found that there was a mechanism by which the revocation could be reversed, the pursuers would return to the Board of Appeal. Even if there were to be no means by which the revocation could be reversed, the pursuers would maintain that the revocation had no retrospective effect. Lack of reversal did not mean that the only determination which was compliant with the Convention should be disregarded. Counsel wished to preserve the argument that the defenders' liability in respect of an account of profits would not be affected.

Discussion

[20] Counsel for both parties recognised that it was necessary for this court to consider the relationship between it and the proceedings before the Board of Appeal. The court was referred to the decision of Jacob J. in the Patents Court in Lenzing AG's European Patent (UK) [1997] R.P.C. 245, in which Lenzing sought judicial review of a decision of the Board of Appeal of the European Patent Office on the ground that there had been a serious procedural injustice, amounting to a breach of natural justice. At pages 263-264 Jacob J. referred to the judgment of Millet J in Re International Tin Council [1987] 1 Ch 419, in which he held that the English courts had no power to wind up the Tin Council. Referring to that judgment at page 451, Jacob J. said:

"I think that is exactly true here. This country has agreed with the other State members of the EPC that the final arbiter of revocation under the new legal system is to be the Board of Appeal of the EPO. Other States would be justly entitled to complain if we in this country were to ignore such a final decision ... I think the general words of section 77(4A) - 'in accordance with the EPC' - no more have the effect of enabling our courts to look into the propriety of the actions of the Board of Appeal, than the general words of the Companies Act had in Tin. The suggested course would be to: 'hijack an organisation to which [one sovereign State] and other States had given birth and subject it (contrary to the treaty terms) to its own domestic jurisdiction' per Bingham L.J. in Arab Monetary Fund v Hashim (No 3) [1990] 2 W.L.R.139 at page 164. One can put the matter another way: the EPO has an internal legal system of its own. This follows inherently as a matter of course from its own structure as an international organisation. And it is made explicit by Article 1. The position is described succinctly in International Institutional Law (Schermers and Blokker) 3rd Revised Edition, 1995, para.1141): 'Unlike private international organisations, public international organisations are not subject to any national law. Thus, they must create their own internal law. The resulting law is an exclusive part of a separate legal order, which is dependent on the organisation's own constitution, but independent of any other legal order'.

Suppose the position were otherwise. Then so far as I can see there would be no limit on collateral attacks on decisions of the Board of Appeal. This is reflected in the fifth question posed in this case. A party would be able to say that a Board had gone wrong to the extent of an excess of its powers for any of the kinds of reason set forth in that question: procedural misfeasance, error of law (including both misinterpretation of the Convention or a misreading of a patent claim or the prior art) acting in the absence of any evidence and so on might all be said to be otherwise than in accordance with the Convention. Parliament cannot had intended by those general words such a breach in the 'common system of law' created by the Convention".

[21] Lenzing also presented a more limited argument which sought to invoke the principle that an English court would not recognise the judgment of a foreign court where its proceedings had been in breach of natural justice. Jacob J. said:

"The answer, which I think is clear, is that it would be contrary to the international treaty even to inquire into the question. Mr Prescott's appeal to public policy is met by a conflicting policy. The United Kingdom and the other Member States have agreed at an international level via the EPC that the Board of Appeal is the final arbiter of oppositions. It is the agreed EPO equivalent of the House of Lords, Cour de Cassation, or Bundesgerichthof. It is not for national courts to query its doings, whether in a direct or collateral attack".

[22] Finally, at page 265, Jacob J. rejected the submission that the European patent office was different from other international organisations, in respect that it was a body whose decisions took effect in national law, and by virtue of an Act of Parliament. He observed:

"The EPO is clearly recognised on the plane of international law. The Patents Act causes its decisions to be recognised here as a matter of national law. But its decisions remain decisions at the international level so it is no business of our courts to go into them".

[23] Counsel for the defenders maintained that these robust observations were directly applicable to the pursuers' contention that this court could decline to give effect to the decision of the Board of Appeal. Counsel for the pursuers, on the other hand, maintained that the coming into force of the Human Rights Act since the decision in Lenzing had changed the position. Under section 6(1) of the Act it was unlawful for a public authority, such as a court, to act in a way which was incompatible with a Convention right. Section 3(1) was imperative in its terms:

"So far as it is possible to do so, primary legislation and subordinate administration must be read and given effect in a way which is compatible with the Convention rights".

The fact that the conduct of an international tribunal was in question made no difference. It was also to be noted that, since a European patent was to be treated as if it were a patent granted under the Patents Act, it was open to a court in the United Kingdom to revoke such a patent despite a finding of validity by the European Patent Office.

[24] In approaching these conflicting submissions we require to consider the proper scope of section 3 of the Human Rights Act. In Ghaidan v Mendoza Lord Nicholls of Birkenhead pointed out at paragraph 30 that section 3 might require a court to depart from the unambiguous meaning which legislation would otherwise bear. However, he went on to observe at paragraph 33:

"Parliament, however, cannot have intended that in the discharge of this extended interpretative function the courts should adopt a meaning inconsistent with a fundamental feature of legislation. That would be to cross the constitutional boundary Section 3 seeks to demarcate and preserve. Parliament has retained the right to enact legislation in terms which are not Convention-compliant. The meaning imported by application of section 3 must be compatible with the underlying thrust of the legislation being construed. Words implied must, in the phrase of my noble and learned friend Lord Rodger of Earlsferry, 'go with the grain of the legislation'. Nor can Parliament have intended that section 3 should require courts to make decisions for which they are not equipped. There may be several ways of making a provision Convention-compliant, and the choice may involve issues calling for legislative deliberation".

[25] In our view it is not possible to "read down" section 77(4A) by importing the qualification advocated by the pursuers. It is plain that an enactment in a contracting state which required its courts to apply a certain interpretative principle to the legislation of that State could not confer on those courts any right or discretion to ignore or reduce the effect which they would otherwise have to attribute to the decision of an international tribunal such as the Board of Appeal. Accordingly there can be no question of section 3 "trumping" the effect which the United Kingdom agreed to give to the decision of a Board of Appeal. We would add that there is in any event no ground for treating Article 68 as if it were subject to an implied limitation such as the pursuers sought to import into section 77(4A). That would imply that national courts would be able to determine for themselves whether the proceedings were Convention-compliant. A complaint about lack of compliance with human rights is just another example of the types of complaints which Jacob J. in Lenzing regarded as being out of bounds. There is no contradiction between this and subsection (1) of section 6 of the Human Rights Act since, in terms of subsection (2)(a), that subsection does not apply to an Act if "as a result of one or more provisions of primary legislation, the authority could not have acted differently". We should add that the case of an international tribunal is fundamentally different from that of a foreign court where a domestic court may decline to give effect to the latter's decision (see, for example, SA Marie Brizard et Roger International v William Grant & Sons Ltd. 2002 SLT 1365).

[26] For these reasons we do not find it necessary to examine in any detail the elements of the pursuers' complaints in regard to the proceedings before the Board of Appeal, which are the subject of the application to the ECtHR.

[27] We should add that it appears to us that there was no logical or legal basis for the submission of pursuers' counsel that the court could, on the one hand, accept the effect of revocation within the United Kingdom and other designated States, but, on the other hand, preserve as between the pursuers and the defenders the liability which the Lord Ordinary had found to be established. A patent such as a European patent is a right of property, and in suing the defenders the pursuers were seeking remedies based on their right of property. That right of property was created by virtue of the European Patent Convention. The effect of revocation under that Convention was that from the outset the pursuers had no substantive right to the patent. The United Kingdom was bound to give effect to that in legislation. There is nothing in the Patents Act which could justify preserving, as between the patentee and another party, some residual effect of a revoked European patent.

[28] We do not overlook the arguments which were presented as to the possible consequences of the pursuers' application to the ECtHR, namely, that if that application were to be successful, recall of the Lord Ordinary's interlocutor and granting of decree in favour of the defender would be shown to have been an infringement of the pursuers' Convention rights. However, it is clear that, even if the application were held to be both admissible and well-founded, this would not, of itself, have any effect on the revocation of the pursuers' European patent. The ECtHR cannot require the European Patent office to reinstate the pursuers' patent. It might, at most, award monetary compensation for loss of the patent. Whether, and with what effect, any measures might subsequently be introduced to enable the decision of a Board of Appeal to be reviewed cannot, at this stage, be more than a matter for speculation.

[29] For these reasons we consider that the defenders' arguments are well-founded and that the Human Rights Act presents no barrier to giving effect to them. The reclaiming motion will be allowed, the interlocutor of the Lord Ordinary recalled, and the defenders assoilzied.