Handed down on the same day as the Supreme Court’s Uber ruling, IPCom v Vodafone may not have dominated the headlines, yet this case should not be overlooked as the first major Court of Appeal IP decision of 2021.
Crucially, the appeal concerned very topical questions on the “Crown Use” defence under sections 55-59 of the Patents Act 1977 (the “Act”), which infrequently comes before the UK Courts. Prominent IP judge Arnold LJ gave the leading judgment for the Court of Appeal (with Lewison LJ and Asplin LJ agreeing), ultimately ruling in favour of IPCom.
Last year, Mr Recorder Douglas Campbell QC, sitting as a Judge of the High Court, held that IPCom’s European Patent (UK) number 2,579,666 (“EP666”) was valid, standard-essential, and infringed in an amended form by Vodafone. The case had concerned Vodafone’s alleged infringement of EP666 in its deployment of the Mobile Telecommunications Privileged Access Scheme (“MTPAS”), under which certain classes of ‘privileged users’ are granted priority access to Vodafone’s telecoms in an “emergency” under the Civil Contingencies Act 1994.
Despite being found to infringe, Vodafone successfully avoided paying substantial damages by relying on the seldom-used Crown Use defence to patent infringement. Section 55(1) states that:
“any person authorised in writing by a government department may … do any of the following acts in relation to a patented invention without the consent of the proprietor of the patent … and anything done by virtue of this subsection shall not amount to an infringement of the patent concerned.”
The High Court ordered the relevant Government department to compensate IPCom for Vodafone’s infringement, as required by section 57A of the Act.
THE FACTS AND ARGUMENTS
In bringing the appeal, IPCom and the Secretary of State for Defence (“SDD”) on behalf of the UK Government, submitted that Campbell QC erred in his construction of “authorised in writing by a government department”, under section 55(1) of the Act. The three possible interpretations to be considered at the Appeal were that s.55(1) required:
- An express authorisation to work the patent in question;
- Either an express authorisation to work the patent or an authorisation to do a particular act in circumstances where that act necessarily infringes the patent; and
- An authorisation to do a particular act even where this does not necessarily involve infringing the patent.
IPCom supported the second interpretation, whereas Vodafone (and the High Court) had favoured the third construction. SSD contended that the first interpretation was correct, although it conceded that an express authorisation to work any patent would suffice, rather than a specific patent in issue. Note that Campbell QC’s conclusion that Vodafone’s acts were “for the services of the Crown” was not at issue in the Appeal.
Vodafone also advanced the argument that its use of any technology covered by EP666 would be de minimis, and therefore did not constitute patent infringement (an argument which failed before the High Court).
Arnold LJ overturned the High Court’s decision on Crown Use, readily dismissing the third interpretation and, in doing so, advanced thirteen comprehensive reasons in favour of the second interpretation.
Arnold LJ contended that, on a natural construction of section 55(1), an authorisation to do “an act” must relate to the patented invention in question, rather than broadly to do certain acts. An authorisation does not extend to acts that do not necessarily infringe the patent, in line with the law of agency. This interpretation was also supported by authorities pre-dating the Act. Arnold LJ also concluded that express authorisation was not necessary to enable the Crown to make an informed decision to select contractors tendering for a government contract.
The key policy consideration advanced by IPCom in favour of a narrow interpretation of section 55(1) was endorsed by Arnold LJ, namely: “one of respect for private intellectual property rights unless State exploitation is in the public interest and in that case the owner of the right is to be notified and compensated”.
Arnold LJ also considered the difficulties in identifying patents essential to specific standards in telecommunications network when undertaking freedom to operate analysis, particularly given the expanding doctrine of equivalents. Nonetheless, Arnold LJ made clear that he considered suppliers far better placed to conduct such investigations than purchasers of those products / services, which includes the Crown itself.
Arnold LJ also rejected Vodafone’s argument that its use of EP666 was de minimis. This defence is to be determined solely by the scale of the uses in question (which is a fact-specific, rather than quantitative, assessment). Even though the deployment and testing of MTPAS was only a tiny fraction of Vodafone’s base stations’ activity, Arnold LJ did not consider that use to be the kind that could be considered de minimis. The very nature of the MTPAS system is that it would only rarely be deployed.
Arnold LJ’s ruling, which emphasised that the Crown should “not be unduly exposed to unforeseen liabilities,” ought to provide comfort to government departments, despite SSD’s initial arguments failing. A wide interpretation of what constituted “authorisation” risked the Government ultimately picking up the bill for patent infringement damages, despite infringement not being apparent at the date of authorisation.
This decision is the first such case concerning Crown Use in telecoms network infrastructure and, although rarely invoked as a defence, it demonstrates the Courts’ reluctance to uphold Crown Use, which should be relied on as a last resort. This places the burden on suppliers (rather than the Crown) to conduct potentially extensive freedom to operate investigations to avoid infringement of a third party’s intellectual property (including with respect to designs where a similar Crown Use defence is available). This is particularly advised in the telecoms sector, due to the standard-essential patents regime.
More broadly, the Court of Appeal’s decision has occurred at a critical time, where COVID-19 has brought questions of Crown Use back to the forefront of conversation (it was noteworthy that the themes of many of Arnold LJ’s case law citations were national emergencies, including world wars). However, despite anticipating that this defence might well be invoked to supply the NHS with patented drugs/apparatus to treat COVID-19 patients (see our 2020 article on this here), there have been no UK decisions to date.
Clarification was also provided on the de minimis principle – use of the patented technology cannot be assessed for infringement merely on a percentage-based, quantitative basis, though some such factors may be relevant in assessing damages/remedies.