Appealing a Finding of Invalidity after Settling

The recent decision of the English Court of Appeal in Apimed Medical Honey Ltd v Brightwake Ltd [2012] EWCA Civ 5 is substantively uninteresting (see my IPKat post), but it raises an interesting point of English procedure. The defendant had won at trial on both infringement and invalidity. The parties settled (the decision was very strong on infringement), but the patentee wished to appeal the finding of invalidity. Because of the settlement, the defendant had no interest in appearing, so following guidance provided in Halliburton Energy Services Inc v Smith International (North Sea) Ltd [2006] EWCA Civ 185, the Comptroller-General of the Patent Office appeared to argue the case for upholding the decision below that the patent was invalid.

In Haliburton the Court of Appeal explained that, “In recent years a number of cases have come to this court in similar situations, or where the appeal has actually been allowed by consent. The practice has grown up of restoring the patent to the register without argument and with a comment that the restoration did not mean the patent had been held valid or ruled upon in any way by this court” [2]. The Comptroller argued that “that practice is wrong; that this court cannot, without deciding for itself, reverse an order for revocation. It must be satisfied that the judge below was wrong” [2]. Haliburton agreed: “They say they do not want their patent restored by, in effect, an administrative order of this court. If that is what they get they will have damaged goods. They want a ruling that the judge was wrong” [3]. The Court of Appeal also agreed, and held that this old practice had to stop: “The normal position must be that the Court of Appeal will not restore a patent which has been held invalid by the court below unless that decision is shown to be wrong” [5]. The Court of Appeal held that it would hear the appeal as a matter of substance, with the Comptroller appearing to argue against restoring the patent, and the Comptroller’s costs paid by the patentee.

So far as I am aware, there is no equivalent procedure in Canada. The closest may be Free World Trust v Électro Santé Inc., 2000 SCC 66, [10] in which the respondent was bankrupt and the respondents' trustee in bankruptcy elected not to participate in the appeal to the Supreme Court. However, Procter & Gamble successfully applied to intervene in support of the correctness of the outcome arrived at by the Quebec Court of Appeal, and the Supreme Court treated the appeal as if the respondent had appeared.

The advantage of the Haliburton procedure is that it would encourage settlement. A patentee who, as in Apimed, realized after trial that he was bound to lose on infringement, could nonetheless agree to settle, to the benefit of the defendant. The disadvantage is that the Comptroller might not argue the case for invalidity as forcefully as would the infringer. Also, even with costs paid, it is not evident that the Comptroller would have the resources to appear in these matters, so that, in effect, the defendant would not have to. (In the English practice the Comptroller is not required to appear: Haliburton [9]. I do not know on what basis the Comptroller decides whether to do so, but the Apimed case did not involve any important point of legal principle.) And English practice is different from Canadian practice in that under the Rules the Comptroller is always a party to a patent action, though he does not normally appear. This makes it procedurally much more straightforward to allow the Comptroller to argue the case. Presumably in Canada a change to the Rules would be required.

With all that said, I wonder if would be worthwhile to implement the Haliburton practice in Canada?

Thanks to Alex Stack of Gilbert's LLP for enlightening me as to Canadian practice (though any misunderstandings are mine), and pointing out the Free World situation.