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IN THE SUPREME COURT OF JUDICATURE CCRT1 97/1233 CMS2

(HIS HONOUR JUDGE FORD )

Royal Courts of Justice

Strand

London WC2

Friday 20 March 1998

B e f o r e:

LORD JUSTICE ROCH

LORD JUSTICE ALDOUS

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BUEHLER AG

Plaintiff/Appellant

- v -

CHRONOS RICHARDSON LIMITED

Defendant/Respondent

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(Transcript of the handed down judgment

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 421 4040

Official Shorthand Writers to the Court)

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MR C FLOYD QC (Instructed by Messrs Briffa & Co, London N! OQH) appeared on behalf of the Appellant

MR G BURKILL (Instructed by Messrs Linnells, Oxford, OX1 1BB) appeared on behalf of the Respondent

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J U D G M E N T

(As approved by the Court)

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©Crown Copyright

JUDGMENT

LORD JUSTICE ALDOUS: The Appellants, Buehler AG, are the proprietors of European Patent (UK) No 256222 in respect of an invention entitled "Balance for the continuous weighing and for the determination of the flow rate of bulk foodstuffs treated in a grain mill." That patent was granted on l5 January l992. On l4 October l992 it was opposed by the Respondents, Chronos Richardson Limited, under Article 99 of the European Patent Convention. There was a hearing by the Opposition Division on 29 October l993, but it was not until 24 March l995 that a written decision was given rejecting the opposition. No appeal was filed.

On l9 April l996, the Appellants started proceedings in the Patents County Court against the Respondents alleging infringement of the patent. The Respondents in their defence, served on 4 July l996, denied infringement, alleged that the patent was invalid and counterclaimed for its revocation. The allegations of invalidity repeat the allegations that were raised in the Opposition. On 2l February l997 the Appellants applied to strike out the allegations of invalidity upon the basis that they were res judicata having been decided by the Opposition Division or were otherwise an abuse of process. That application was dismissed by HH Judge Peter Ford in his Order of l3 August l997. It is against that Order that the Appellants appeal. The Respondents' notice seeks to support the Judge's decision on grounds not relied on by him and also alleges that if the Appellants are correct, the action should be struck out because there could not be infringement upon the construction of the claims that are binding upon the parties.

The basic issue raised in the appeal is the same as that dealt with by the Judge - Can a party who has unsuccessfully opposed a patent in the European Patent Office rely on the same allegations of invalidity as were dealt with by the European Patent Office as grounds of defence and counterclaim in proceedings for infringement brought by the patentee?

The Judge held that decision in opposition proceedings should not be treated as giving rise to an estoppel because to do so would be wholly incompatible with the scheme of European patent law which is incorporated into English law by the Patents Act l997. He went on to conclude that to litigate the matters raised in the defence and counterclaim did not amount to a misuse of the Court's procedure in a way which would be manifestly unfair or otherwise bring the administration of justice into disrepute amongst right thinking people. Therefore there was no abuse of the process which would require the allegations to be struck out. The Appellants challenge the first of those findings.

The European Patent Convention was entered into to strengthen co-operation between the States of Europe in respect of inventions and to enable protection to be obtained in the Contracting States by a single procedure. For that purpose the European Patent Office was set up as part of a European organisation based in Munich. To implement the procedures laid down in the Convention the Patent Office was required to have seven departments - a Receiving Section, Search Division, Examining Division, Opposition Divisions, a Legal Division, Boards of Appeal and an Enlarged Board of Appeal (Article l5).

The procedure for obtaining a European patent is contained in Parts III and IV of the Convention. The application once filed is dealt with by the Receiving Section which examines it to ensure that it complies with the formal requirements laid down. If it does, the Search Division produces a report upon validity which is sent to the Applicant. The patent, if it is to proceed, is then published and thereafter examined by the Examining Division. The Examining Division either refuses or grants the patent. Within nine months of publication of the mention of the grant any person may give notice of opposition (Article 99). The proceedings are not strictly an opposition as the patent has been granted. They are what can be called "belated opposition" proceedings. The possible grounds for opposition - the patent is not patentable, insufficiency and extension of subject matter - are set out in Article l00. The Opposition Division, having considered the evidence put forward by the parties and after hearing submission, decides whether the grounds for opposition prejudice the maintenance of the patent [Article l0l(l)]. "If the Opposition Division is of the opinion that the grounds for opposition ... prejudice the maintenance of the European Patent", it is revoked. If the grounds do not prejudice the maintenance, the opposition is rejected. If the Opposition Division decides to maintain the patent subject to amendments proposed, the patent will be maintained in amended form subject to approval of the text by the patentee and payment of the printing fee. The decisions of the Receiving Section, Examining Divisions and of the Opposition Division are subject to appeal to the Board of Appeal (Articles 106 and ll0). Certain questions can be referred to the enlarged Board of Appeal. The Board of Appeal has power to remit the opposition back to the Opposition Division or to decide the appeal. If it does so, there is no further appeal.

The Convention is split up into parts. Part I concerns "General and Institutional Provisions". Its first chapter sets out general provisions, the second provides for the setting up of the European Patent Organisation, the third provides for the organisation and duties of the European Patent Office and the fourth the composition and operation of the Administrative Council. Part II contains provisions as to substantive law designed to harmonise the law of Contracting States. Part III is entitled "Application for European Patents". Chapter I is concerned with filing. The procedure adopted by the Patent Office up to grant is governed by the Articles in Part IV. The "Opposition Procedure" is in Part V and the "Appeals Procedure" is in Part VI. Part VII deals with procedure generally. Part VIII is entitled "Impact on National Law". Chapter I deals with the method of conversion of a European patent into a patent of a Contracting State. Chapter II is concerned with "Revocation and prior rights". Article l38 is in this form:

"Article 138

Grounds for revocation

1. Subject to the provisions of Article l39, a European patent may only be revoked under the laws of the contracting State with effect from its territory on the following grounds:"

There are then set out five grounds of revocation: the patent is not patentable, insufficiency, extension of subject matter, extension of protection and lack of entitlement by the proprietor.

The Patents Act l977 was enacted to, inter alia, give effect to the European Patent Convention. Section 77 provides that as from grant a European patent is to be treated as if it were a patent under the Act granted in pursuance of an application made under the Act. The power to revoke such a patent is contained in Section 72. That Section enables the Court or the Comptroller to revoke a patent upon the grounds of lack of patentability, insufficiency, extension of subject matter, extension of protection and lack of entitlement by the proprietor. It should be noted that the jurisdiction under Section 72 exceeds that exercised by an Opposition Division under Article l00.

Mr Floyd QC, who appeared for the Appellants, submitted that where there was a judicial decision that was final, both cause of action estoppel and issue estoppel can apply to the validity of a patent. That is correct - see Chiron v Organon (l994) FSR 448, and Kirin Amgem v Boehringer Mannheim (1997) FSR 289. He went on to submit that the distinction between cause of action and issue estoppel was not of great significance in this case because the Respondents were not seeking to raise any ground other than those specifically decided in the European Patent Office. The difference between the two may not appear to be of great significance, but to disregard any significant difference could lead to a wrong conclusion.

Cause of action estoppel

The distinction between cause of action and issue estoppel was made clear by Lord Keith in Arnold v National Westminster Bank Plc (1991) 2 AC 93 at 104:

"It is appropriate to commence by noticing the distinction between cause of action estoppel and issue estoppel. Cause of action estoppel arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual matter which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the law of England, permit the latter to be re-opened. .... The principles upon which cause of action estoppel is based are expressed in the maxims nemo debet bis vexari pro una et eadem causa and interest rei publicae ut finis sit litium. Cause of action estoppel extends also to points which might have been but were not raised and decided in the earlier proceedings for the purpose of establishing or negativing the existence of a cause of action. In Henderson v Henderson (1843) 3 Hare 100, 114-115, Sir James Wigram V-C, expressed the matter thus:

'In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.'

It will be seen that this passage appears to have opened the door towards the possibility that cause of action estoppel may not apply in its full rigour where the earlier decision did not in terms decide, because they were not raised, points which might have been vital to the existence or non-existence of a cause of action. The passage has since frequently been treated as settled law, in particular by Lord Shaw, giving the advice of the Judicial Committee of the Privy Council, in Hoystead v Commissioner of Taxation (1926) AC l55, l70. That particular part of it which admits the possible existence of exceptional cases was approved by Lord Kilbrandon in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd (1975) AC 581, 590:

'The shutting out of a 'subject of litigation' - a power which no court should exercise but after a scrupulous examination of all the circumstances - is limited to cases where reasonable diligence would have caused a matter to be earlier raised; moreover, although negligence, inadvertence or even accident will not suffice to excuse, nevertheless 'special circumstances' are reserved in case justice should be found to require the non-application of the rule'."

Mr Floyd submitted that there was cause of action estoppel even though the grounds of revocation in Section 72 do not equate with the grounds of opposition in Article l00. He submitted that the cause of action before the Opposition Division and therefore the subject of the estoppel was the invalidity of the patent.

Because the Opposition Division had rejected the opposition it was no longer open to the Respondents to contend that the patent was invalid. He accepted that no estoppel applied to the grounds of revocation in Section 72 which did not appear in Article l00, but that, he submitted, was a special circumstance. Alternatively, Mr Floyd submitted, that the cause of action was invalidity upon the grounds set out in Article l00.

Cause of action estoppel is founded upon the principle that there must be finality to litigation. It applies to the issues raised and also to matters which might have been raised and decided in the earlier proceedings. But it only applies when the cause of action in the earlier proceedings is identical to that in the later proceedings.

The causes of action in the proceedings before this Court can be ascertained from the defence and counterclaim. In the defence invalidity is pleaded as a defence to an allegation of infringement. Thus the cause of action is infringement. The counterclaim raises a separate cause of action, namely that the patent, which is to be treated as if it were a patent granted under the l977 Act, should be revoked pursuant to the Court's jurisdiction under Section 72.

Before the Opposition Division of the European Patent Office, the cause of action, if it be a cause of action, was whether the patent should be maintained or revoked pursuant to the jurisdiction given to the Opposition Division by Articles 100 to l02.

The European Patent Office did not have before it and did not decide infringement. It follows that any submission that the Respondents were estopped from challenging the validity of the patent as part of their defence in the action cannot be right. That was conceded.

The cause of action pleaded by the Respondents in their counterclaim is not, in my judgment, identical to that decided by the Opposition Division of the European Patent Office. The Opposition Division had to decide an opposition which required a decision as to whether the European Patent should be maintained or revoked upon the three grounds of opposition set out in Article l00. The counterclaim contains an allegation of invalidity in revocation proceedings brought against the United Kingdom Patent under Section 72 of the Patents Act l977. The fact that the grounds of revocation under Section 72 are not the same confirms the view that the causes of action are not identical.

Even though I am of the view that there can be no cause of action estoppel in this case as the causes of action are not identical, there is a more fundamental reason why no such estoppel arises. The decision of the Opposition Division was not a final judicial decision as to the validity of the patent.

The Convention set up a European Patent Organisation. Its task was said in Article 4 to be "to grant European patents. This shall be carried out by the European Patent Office supervised by the Administrative Council". That task is carried out by the various divisions of the European Patent Office and despite the fact that an opposition is a post-grant proceeding, the Convention treats it as being part of the grant process. The Convention reflects the dichotomy between the need for proper examination so that invalid patents are not granted and the damage inflicted upon applicants by delayed grant. The route chosen is quick publication followed by grant and belated opposition. Opposition proceedings are not true inter parties proceedings as Article ll4 makes clear. The Opposition Division can examine facts of its own motion and is not restricted to the facts, evidence and agreements provided by the parties. Rule 60 enables the European Patent Office to continue an opposition of its own motion despite withdrawal by one or all of the parties. (see G8/9l 6 OJ l993, 346 at 351 and G9/9l, 7 OJ 408 at 4l8).

Article 99 provides for "Opposition". The French text of that Article uses the same word; the German text calls it "Einspruch". Revocation - "Nullité" in the French and "Nichtigkeit" in the German - is covered by Chapter II and in particular Article 138. The Convention views opposition and revocation proceedings as different proceedings, although the issues overlap. Article 138 which sets out grounds of revocation states that "a European patent may only be revoked under the law of a contracting state, with effect for its territory on the following grounds ...." No doubt, as Mr Floyd submitted, the Article prevents revocation except on grounds set out in the Article, but the Convention, when read as a whole, lays down a logical structure with the national courts having exclusive jurisdiction over revocation proceedings and the European Patent Office having the task of granting European patents (Article 4). Once granted, the patent becomes a patent of the chosen Contracting State. It is the courts of that Contracting State that have to decide infringement and revocation and any decision of the European Patent Office does not preclude the Courts of the Contracting State from deciding all issues of infringement and revocation. That was made clear in G9/9l, OJ 7/1993 408. In that opposition the Enlarged Board of Appeal, which included K Bruckhausen from the German Bundesgerichtshof and J Brinkhof from the Dutch Court of Appeal, had to consider whether it was permissible on appeal to take into account fresh grounds of opposition. At page 4l9 the Board said:

"The purpose of the appeal procedure inter partes is mainly to give the losing party the possibility of challenging the decision of the Opposition Division on its merits. It is not in conformity with this purpose to consider grounds for opposition on which the decision of the Opposition Division has not been based. Furthermore, in contrast to the merely administrative character of the opposition procedure, the appeal procedure is to be considered as a judicial procedure. .... Although Article ll4(l) EPC formally covers also the appeal procedure, it is therefore justified to apply this provision generally in a more restrictive manner in such procedure than in opposition procedure. .... This approach also reduces the procedural uncertainty for patentees having otherwise to face unforeseeable complications at a very late stage of the proceedings, putting at risk the revocation of the patent which means an irrevocable loss of rights. Opponents are in this respect in a better position, having always the possibility of initiating revocation proceedings before national courts, if they did not succeed before the EPO".

The Bundesgerichtshof in Zahnkranzfraser (Case No X ZR 29/93) also held that a declaration of nullity (revocation) can be issued by the German Courts on the same grounds that had been raised in an opposition before the European Patent Office. They said:

"a) As the Federal Patent Court rightly stated, the examination of patentability must take into account the entire existing state of the art without restrictions, ie, including the cited prior art which ... was already the subject matter of the examination in opposition proceedings and in opposition appeal proceedings before the European Patent Office. The fact that the nullity proceedings must take account of the entire matter at issue is a necessary consequence of the function of these proceedings and its relationship to the objection proceedings. It is true that the decisions resulting from such proceedings represent expert opinions of considerable importance that must be considered as part of the finding of facts and the evaluation of the evidence; they cannot, however, enjoy any further legal effect (cf., although diverging in part, Brinkhof, l993 GRUR l77, l83, and the references cited by the Federal Patent Court).

The opposition proceedings according to Art. 99 of the European Patent Convention, like the corresponding proceedings under national law (Sec. 59, Patent Act), act as an ex post facto examination of the protectability of a patent already granted. The holder of the patent and the opponent participate in these proceedings, but not as parties. In national law, this is a consequence of the fact that the opposition proceedings can also be continued ex officio after withdrawal of the opposition (Sec. 6l(l), Patent Act). A comparable regulation for European patent law is contained in Rule 60 of the Implementing Order for the Convention on the Grant of European patents of October 5, l973 (subsequently amended). This type of participation alone prevents the decisions of such proceedings having preclusive or prejudicial legal effect on any nullity proceedings.

The subsequent appeal proceedings are not restricted to a mere legal verification of the decision previously issued. ... Rather, these proceedings amount to an additional trial court. Here, too, there is no reason for holding that the decision in such proceedings should have a legal effect that could prejudicially prevent a subsequent investigation in the nullity proceedings of the cited prior art examined in these appeal proceedings. Irrespective of the legal status of the appeal decisions of the European Patent Office, such a conclusion would be incompatible with the structure and principles of nullity litigation in national law. It is the latter which, according to Art. 138(l) of the European Patent Convention, are decisive, since European patent law subjects nullity proceedings to the national courts and the applicable procedural law. According to the latter, an action for nullity, as in the case of a corresponding national patent, can be brought by anybody and the court as a matter of principle must determine the facts of the case ex officio and investigate protectability in detail. According to its function and structure, the purpose of the proceedings is to exercise the general interest in ensuring that those rights are removed from the patent register which, not entitled to protection, have been wrongly granted.

As in the case of national patents, this function excludes the possibility of eliminating or only partially considering a state of the art that was already the subject matter of evaluation during the granting and opposition proceedings before the European Patent Office. Since by Art. 138 of the European Patent Convention the subsequent destruction of a European patent already granted is transferred to the national authorities of the contracting states with respect to their own sovereign territories and subject to their own laws, it would have required an express regulation if this power granted to the national courts, the details of which are not specified, were to be restricted by a decision issued in the granting or opposition proceedings. Such express regulation is contained neither in the European Patent Convention nor in its implementation into national law by the Act on International Patent Conventions. On the contrary, both include the question of patentability according to Art. 52 of the European Patent Convention expressly and unreservedly within the examination of the European patent in nullity proceedings."

Of course a decision of the Bundesgerichtshof is not binding upon this Court, but I believe that the reasoning is applicable. Further, it would be very odd, absent statutory provision, if English law required conclusions reached by the Opposition Division to be binding upon the parties in revocation proceedings whereas German law was to the contrary.

The view of the Bundesgerichtshof in Zahnkranzfraser is consistent with that taken in this country over the years, albeit in cases where the question of estoppel was not argued.

In Amersham International Plc v Corning Limited (1987) RPC 53 the defendants sought a stay of High Court proceedings pending determination of opposition proceedings in the European Patent Court. Falconer J said at page 58 as part of his reasoning for rejecting the application:

".... It seems to me reasonable to infer ... that the intention behind the relevant provisions of the European Patent Convention is that revocation of a European patent should primarily be a matter for the national court of the designated state and that when validity is put in issue in proceedings for infringement of a European patent, which can only be brought in the appropriate court of the disputed state, the intention is that both infringement and validity should be litigated in that court."

In Pall Corporation v Commercial Hydraulics (Bedford) Limited (1989) RPC 703 the Defendants sought a stay of the proceedings pending determination of an opposition that was before the European Patent Office. Whitford J at 706 clearly thought that a decision on issues of validity by the European Patent Office would not bar the national court from considering those issues in revocation proceedings. On appeal, Dillon LJ was of the same view. At page 710 he said:

"The effect, of course, of successful opposition proceedings in the European Patent Office would be to destroy the patent altogether .... If, however, the European Patent Office does not revoke the patent or declare it invalid - if, in other words the opposition proceedings fail - then it is still open to the Defendants to dispute validity of the patent once again at the trial of the infringement proceedings in any country in the Community. In other words, successful opposition proceedings put an end to the patent; unsuccessful opposition proceedings do not prevent the issue of validity being challenged afresh in proceedings in the national courts".

In Lenzing AG's European Patent (1977) RPC 245 Jacob J made it clear at page 262 that he believed that Article 138 provided an opportunity for the national courts to consider an attack on the patent after opposition. Although his view was not stated as applying to a case where the parties were the same, it is clear from the general tenor of his judgment that that was his view.

In Biogen (1997) RPCl, the Opposition Division had maintained the patent. Lord Hoffmann who gave the leading speech concluded that the patent was invalid, despite the persuasive authority of the European Patent Office decision.

Mr Floyd relied upon the law in Austria as supporting his submission that a decision in opposition proceedings was res judicata. In that country nullity proceedings have by Act to be stayed pending a decision in the opposition proceedings before the European Patent Office. The Act also provides that issues decided by the European Patent Office in opposition proceedings are binding upon the parties in nullity proceedings. That was recognised in Case T301/95 l998 EPO R 142, a case where the Technical Board of Appeal had to decide whether opposition proceedings could be initiated and prosecuted by a "straw" opponent. Mr Burkill who appeared for the Respondents, submitted that the law in Austria did not throw any light upon how the Convention was to be applied to the issues before this Court. Austrian law was governed by the Austrian Act and, insofar as any inference could be drawn, it was that a decision in opposition proceedings did not finally determine the issues of validity of a patent as, if that was the effect of the Convention, then there was no need for the Austrian Act to make provision that decisions reached by the European Patent Office were res judicata.

I do not believe that the position in Austria throws light upon the effect of the Convention. The law as stated in the Austrian Act appears to be peculiar to that State and there is nothing before this Court which suggests that the Act was enacted otherwise as a matter of expedience.

The decision of the Opposition Division, relied on as giving rise to an estoppel, concluded the opposition and once the appeal period had expired there was no possibility of the parties continuing with it. In that sense it was final. But as pointed out by Lord Herschell in Nouvion v Freeman (1890) l5 AC l that can be said of some interlocutory judgments. He said at page 9:

"It is obvious, therefore, that the mere fact that the judgment puts an end to and finally settles the controversy which arose in the particular proceedings, is not of itself sufficient to make it a final and conclusive judgment upon which an action may be maintained in the Courts of this country ...."

For an estoppel to arise the judgment of the earlier Court, in this case the decision of the Opposition Division of the European Patent Office, must finally and conclusively decide the validity of the patent. That it did not do. Validity is finally decided in revocation proceedings by the Courts of the Contracting States. It follows that no cause of action estoppel arises from the decision of the Opposition Division of the European Patent Office.

Issue estoppel can arise where a plea of res judicata cannot be established because the causes of action are not the same (see Thoady v Thoady (1964) P l8l). But it cannot arise unless the judgment relied upon as giving rise to the estoppel was a final judgment. That being so, for the reasons already stated, no issue estoppel arises in this case.

The decision of the Opposition Division disposed of the opposition. It did not provide grounds for an estoppel in revocation proceedings under Section 72 of the Act. If it had done so, it would probably not have helped to shorten these

proceedings as there would remain considerable difficulty in application.

The Judge was right. Therefore there is no need to consider the matters raised in the Respondents' Notice. I would dismiss the appeal.

LORD JUSTICE ROCH: I agree.

Order: Appeal dismissed with costs. Leave to appeal to the House of Lords refused. Application for a stay granted.