Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2011] CSOH 60
A680/07	OPINION OF LORD HODGE in the cause VERATHON MEDICAL (CANADA) ULC Pursuer; against AIRCRAFT MEDICAL LIMITED Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Currie QC et Higgins; Maclay Murray & Spens LLP

Defender: Lake QC; DLA Piper Scotland LLP

30 March 2011

[1] On 1 February 2011 I issued an opinion ([2011] CSOH 19), which has given rise to these motions for expenses. In that opinion I refused the pursuers' application to amend their patent, assoilzied the pursuers from the conclusions of the counterclaim in which the defenders sought to challenge the validity of the pursuers' patent, and granted the defenders absolvitor in the action for infringement of the pursuers' patent.

[2] The pursuers sought (i) the expenses of the counterclaim, (ii) the certification as skilled witnesses of Dr Ron Walls, Dr Christopher Frerk and Professor Colin Roberts, each of whom gave evidence at the proof, and (iii) an award of an additional fee under Rule of Court 42.14(3) having regard to each of the factors specified in parts (a)-(g) of that Rule.

[3] The defenders opposed that motion. If the court were to award expenses to the pursuers, the defenders opposed the award of an additional fee only to the extent that regard should not be had to factors (d) and (g). Factor (d) of rule 42.14(3) is "the place and circumstances of the cause or in which the work of the solicitor in preparation for, and conduct of, the cause has been carried out." Factor (g) is "the steps taken with a view to settling the cause, limiting the matters in dispute or limiting the scope of any hearing."

[4] The defenders sought (i) the expenses of the principal action, (ii) the expenses of the counterclaim, (iii) the expenses of the pursuers' minute under Rule of Court 55.5 to amend their patent, (iv) the certification as skilled witnesses of Dr John Henderson, Professor Peter Denyer and Dr Ian Muirhead, and (v) the award of an additional fee having regard to each of the factors specified in parts (a) to (g) of Rule of Court 42.14(3).

[5] The pursuers did not oppose the defenders' motion in relation to items (i), (iii) and (iv) of the preceding paragraph. They opposed the defenders' application for the expenses of the counterclaim (item (ii)) and their application for an additional fee, (item (v)) but only in relation to factors (d) and (g).

[6] The main issue between the parties was, as Mr Currie stated, the expenses of the counterclaim.

(I) The expenses of the counterclaim

[7] In his submission in support of his motion, Mr Currie made six points. First, he argued that the counterclaim was a distinct ground of action. Secondly, he pointed out that the defenders had tabled twenty two pieces of prior art in relation to laryngoscopes and eight pieces of prior art in relation to cameras in support of their challenge to the validity of the pursuers' patent. The pursuers had had to address each of these pieces of prior art in their pleadings, their expert reports and their evidence. His instructing solicitors had examined the transcripts and had estimated that about 40% of the evidence had been common to the issues of infringement and validity, 37.5% had related to validity alone and 7% to infringement alone. The balance concerned the Glidescope and the applications to amend.

[8] Thirdly, notwithstanding the extensive citation of prior art, the defenders in their final submissions had relied on only eight pieces of prior art in their challenge to the validity of the pursuers' patent. This, he submitted, demonstrated that much of the cited prior art had no bearing on the case.

[9] Fourthly, on the defenders' construction of the pursuers' patent they failed to prove its invalidity. The onus was on them to do so. Fifthly, he submitted that it was not relevant that the court had expressed the view that if the construction of the patent which the defenders opposed had been correct, it would have been minded to hold the patent invalid because of the Wood patent and the AVIL device. He pointed out that the defenders had asserted that other prior art, including the Bullard laryngoscope and other devices with anatomically shaped blades, invalidated the pursuers' patent, even on their interpretation of its scope.

[10] Sixthly, he submitted that the court should have regard to the wider context of the defenders' opposition to the pursuers' patent. They had opposed the pursuers' patent before the European Patent Office (EPO) in February 2006. After the EPO amended the patent in October 2007, both sides had appealed that decision. The EPO Board of Appeal upheld the amended patent in May 2010. Thus in the face of these failed challenges, the defenders chose again to challenge the pursuers' patent in these Scottish proceedings.

[11] In the circumstances he submitted that there was no reason to depart from what he described as the "rough and ready" rule that expenses follow success. It would, he argued, be unfair to award the defenders the expenses of the counterclaim. He suggested that one possibility to reflect the context of the challenge in infringement proceedings would be to discount an award of expenses in favour of the pursuers.

[12] Mr Lake accepted that the defenders had not succeeded in the counterclaim but submitted that that should not determine the award of expenses. The issue for the court was how to achieve justice between the parties.

[13] Of central importance in that regard was the consideration that it was only because of the very broad interpretation which the pursuers placed on their patent that the defenders had mounted their challenge to the patent. In their attempt to establish that the defenders' Series 5 laryngoscope infringed their patent the pursuers had had to argue that the Series 5's curved blade or arm was "substantially straight". The primary defence to that assertion was that the Series 5 did not have that integer of claim 1 of the pursuers' patent. But, faced with a damages claim of £37 million, the defenders took that view that, if the pursuers' patent were to be given such a wide meaning, it would have been obvious in the light of the prior art. The decision of the court bore out that judgement.

[14] The challenge based on the Wood patent had been confined to the contingency that the pursuers' interpretation of their patent was accepted. But he accepted that the defenders had also mounted their challenge to validity based on the Bellhouse patent and the Belscope and that that prior art was cited to support a case of obviousness on either party's interpretation of the pursuers' patent.

[15] He invited the court to have regard to the procedural history of the challenges. The defenders had relied on the Bellhouse patent and Belscope in opposition to the pursuers' patent before the EPO. In the Opposition Division the EPO had been inclined to regard the pursuers' patent as obvious but had allowed the pursuers to amend their specification to remove that obviousness. Both parties appealed that decision. The pursuers commenced the present action in Scotland shortly after the decision of the EPO Opposition Division. Mr Lake submitted that, if the pursuers had not raised this action of infringement, the defenders would not have challenged the validity of the patent in proceedings in the United Kingdom. It was only once the pursuers raised the proceedings, in which they asserted that the defenders' Series 5 laryngoscope infringed all of the integers of their patent, that the defenders fully understood the breadth of the construction of the patent which the pursuers were advancing. In that context the Bullard laryngoscope, the AVIL device and the Wood and Moritex patents were relevant.

[16] While considerable time had been spent on evidence about the prior art, much of the evidence which the pursuers adduced from Dr Walls about the uses made of that prior art was irrelevant to the issues before the court. The evidence about the pursuers' subsequent product, the Glidescope, was equally irrelevant.

[17] It was important to recall that it was only when the EPO decision of May 2010 was issued, in the course of the proof in this case, that a camera became an integral part of the pursuers' patent. That amendment superseded the defenders' reliance on the Siker laryngoscope for an argument of anticipation and rendered the defenders' arguments about cameras of secondary importance.

[18] In these circumstances Mr Lake submitted that it was not appropriate or consistent with justice that the pursuers should be awarded the expenses of the counterclaim; the defenders should be awarded at least a proportion of their expenses in relation to the counterclaim.

Discussion: The expenses of the counterclaim

[19] The counterclaim was the result of the infringement action. I accept Mr Lake's submission that if it had not been for the infringement action, the defenders would not have challenged the validity of the pursuers' patent in the courts of the United Kingdom. I am therefore satisfied that to hold that expenses follow success would be to take too narrow a view of the relevant circumstances.

[20] I also accept Mr Lake's contention that while the application for revocation in the counterclaim was not successful, that was because I did not accept the extended interpretation which the pursuers sought to place on certain integers in claim 1 of their patent. Had I accepted the pursuers' interpretation, I would have revoked the patent on the ground of obviousness having regard to the Wood patent and the AVIL device. I refer to paragraphs [159] and [165] of my earlier opinion. I do not accept Mr Currie's submission that that is irrelevant. On the contrary, it is highly relevant as it demonstrates that the defenders were justified in mounting a challenge to validity of the pursuers' patent if it bore the meaning which the pursuers asserted. It is not a realistic view of the circumstances, in which the defenders were facing a £37 million claim for damages, to criticise them for challenging the validity of the pursuers' patent and not simply defending the action for infringement on the basis of their interpretation of that patent.

[21] There were numerous devices discussed in the evidence, including the Siker laryngoscope, the Bellhouse patent and Belscope and the Bullard laryngoscope. The evidence about the Siker laryngoscope was rendered irrelevant or at least peripheral by the amendment of the pursuers' patent by the EPO. Nonetheless, the evidence in support of the counterclaim was not confined to an assertion of invalidity only if the patent bore the meaning for which the pursuers contended. The defenders' challenge therefore went beyond what was needed to protect their product from the allegation of infringement.

[22] I accept that a significant part of the proof was spent on the challenge to the validity of the pursuers' patent. I do not rely on the calculation, to which I referred in paragraph [7] above, as it was not tested in discussion. But my recollection of the evidence would suggest that a significant minority of the time taken in the proof was devoted to the challenge to validity alone. This consideration however is of limited importance as I have held that the infringement action brought about the counterclaim and that the counterclaim would have succeeded if the pursuers had been correct in their interpretation of their patent.

[23] I am satisfied that it would accord with justice in the circumstances if the defenders were to be awarded a significant proportion of their expenses in relation to the counterclaim. I can only make a broad judgement as to the proportion which it is appropriate to award having regard to (i) the extent of the evidence which was adduced to support a challenge which would not have succeeded on either party's interpretation of the pursuers' patent and (ii) the changes which the EPO made to the text of that patent in the course of the action. Doing the best that I can, I award the defenders seventy five per cent of their expenses in relation to the counterclaim.

(II) The motions for an additional fee

[24] Mr Currie supported his application for an additional fee with regard to factor (d) on the following grounds. Because the pursuers' attorneys were based in Seattle and there was an eight-hour time difference, the Scottish solicitors had had to work at night to communicate with them by telephone and email. Solicitors had also had to consult with Dr Walls in Boston, USA, and with Professor Roberts in Cornwall. In relation to factor (g) he cited the work undertaken by the pursuers' solicitors (i) to clarify with the defenders' agents (a) whether the defenders relied on the commercial embodiments of certain patents, and (b) the precise characteristics of the skilled person or persons whom the defenders were proponing, (ii) in obtaining examples of the Series 5 device, and (iii) in identifying the documents, the publication of which the pursuers did nor did not admit.

[25] Had I decided to make an award of expenses in favour of the pursuers I would have included factor (d) in the award of an additional fee. Indeed, having heard what Mr Currie had to say in relation to that factor, Mr Lake withdrew his opposition. I would not have included factor (g) as I was not persuaded that in the context of this action what was done was out of the ordinary.

[26] Turning to the defenders' application for a special fee, I am not persuaded that I should include either of factors (d) or (g) in my certification. In relation to factor (d), Mr Lake submitted that the defenders' solicitors had had to search for a witness to replace Professor Denyer after his sad illness and untimely death and that they had had to liaise with Professor Weiss in Zurich. In relation to factor (g) both parties had collaborated in agreeing the joint minute. In my view in the context of this proof Mr Lake has not made out a good case for the inclusion of those factors. I recognise, however, that the Auditor, who may have access to more information on these matters than was available to me at this hearing on expenses, is free to take a different view.

Conclusion
[27] I therefore refuse the pursuers' motions and make the following orders in favour of the defenders:

(1) I award the defenders the expenses of the principal action;

(2) I award the defenders seventy five per cent of their expenses in relation to the counterclaim;

(3) I award the defenders the expenses of the pursuers' Minute seeking amendment of their patent in terms of Rule of Court 55.5;

(4) I certify that (a) Dr John Henderson, (b) Professor Peter Denyer, and (c) Dr Ian Muirhead were skilled witnesses, that it was reasonable for the defenders to employ them to make investigations and to report, and that Dr Henderson and Dr Muirhead gave evidence; and

(5) I allow the defenders an additional fee, having regard to factors (a), (b), (c), (e) and (f) of Rule of Court 42.14(3).