Posted: September 12th, 2013
Virgin Atlantic v Zodiac
Virgin Atlantic Airways Limited v Zodiac Seats UK Limited (formerly known as Contour Aerospace Limited), UK Supreme Court, 3 July 2013,  UKSC 46
This judgment of the Supreme Court fundamentally changes the approach of the UK courts to the award of damages in patent cases, where the patent is subsequently held to be invalid in separate proceedings. A defendant held to have infringed a valid patent can now, in an enquiry as to damages, rely on the subsequent finding of invalidity.
Zodiac had been held to have infringed a valid claim of Virgin Atlantic’s patent relating to the design and layout of reclining seats for use in aeroplanes and no further appeal was possible. However, in parallel EPO opposition proceedings, the patent was subsequently amended to a form in which none of the claims would have been infringed by Zodiac. The Court of Appeal, relying on legal authorities going back over 100 years, held that cause of action estoppel prevented Zodiac from challenging the earlier finding of infringement and validity, with the result that Zodiac was still liable to pay whatever damages were awarded following the enquiry – a sum estimated to be close to £50 million.
The Supreme Court allowed Zodiac’s appeal. Although cause of action estoppel was absolute in relation to issues between the same parties that had been decided in establishing the existence of a cause of action and also applied to issues that had not been raised but could with reasonable diligence have been raised, the estoppel did not apply to issues that were not and could not have been raised in the earlier proceedings.
The fact that the patent in suit had subsequently been amended by the EPO, with retrospective effect, into a form which was not infringed, was something that Zodiac could not have raised in the earlier proceedings, simply because the EPO’s decision had not been made at that time. Zodiac could not challenge the Court of Appeal’s finding that the unamended patent was valid – that was an issue that could not be re-litigated – but on the enquiry as to damages, Zodiac was able to rely on the subsequent fact of the amendment.
This ruling gives effect to the fact that a finding of invalidity (and any consequent amendment) is deemed to have retrospective effect from the date of grant of the patent. However, it still leaves the potential problem of a situation in which damages following a finding of infringement have been paid prior to the patent being held to be invalid in separate proceedings. This could, for example, occur where there are parallel opposition proceedings. The Supreme Court did not make any finding as to whether a restitutionary remedy would be available to the defendant in such a situation but it did note the possibility of injustice occurring. The Supreme Court stated that the Patents Court and Court of Appeal should review the “Glaxo v Genentech” guidelines, which are currently applied when the court has to decide whether to stay national proceedings pending the outcome of an EPO opposition. The implication is that there is potentially a greater likelihood of UK national proceedings, or the enforcement of a judgment of the UK courts, being stayed pending the outcome of the EPO opposition proceedings.
Read the decision (in English) here.
Headnote: Graham Burnett-Hall