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Virgin Atlantic v Zodiac Seats – overhaul of damages by the UK courts


15th Jul 2013

The UK Supreme Court’s ruling of 3rd July 2013 ([2013] UKSC 46) in the long running battle between Virgin and Zodiac concerning infringement of Virgin’s patent rights relating to its Upper Class aircraft seats is set to have a significant impact on the award of damages in the UK, in particular where a European patent is revoked or amended by the European Patent Office (EPO) in post-grant opposition proceedings after a UK Court has already found the UK portion of the European patent to be valid and infringed.

In the earlier “Coflexip” and “Unilin” cases, the UK Court of Appeal decided that a successful claimant is entitled to pursue and be paid damages, notwithstanding the possibility of an appeal by the defendant to a higher UK court or the existence of any opposition at the EPO which might affect the validity of the same patent.

In the present dispute, the Court of Appeal found certain claims of Virgin’s European patent to be valid and infringed and, in accordance with principles established in Coflexip and Unilin cases and in spite of an opposition running at the EPO, awarded damages to Virgin. Zodiac sought to avoid payment of the damages by appealing to the Supreme Court (the highest court in the UK). They attacked the principles set out in the earlier cases and argued that because the EPO Board of Appeal had disagreed with the UK Court of Appeal in finding that the relevant claims were invalid, the patent had never existed in the form in which it was held infringed and so the damages awarded to Virgin must fall away.

Siding with Zodiac in overturning the decision of the Court of Appeal in the present case and overruling the earlier decisions, the Supreme Court has now ruled that where a patent is found to be invalid by the EPO after a finding of infringement by a UK court, any unassessed claim for damages will die away and any damages which have been awarded but which have not yet been paid are unlikely to be payable.

The judgment potentially has a wider impact in suggesting that damages which have already been paid might be recoverable by a defendant seeking restitution through the courts and that these principles concerning non-payment or recovery of damages might also apply where a different defendant is successful in revoking or amending the same patent at the EPO or in a UK court. The lead judge suggested that these issues are likely to be highly dependent on the facts of the particular case.

The Supreme Court’s ruling does not appear to affect legal costs and so it seems that a defendant will not be able to recover the potentially significant costs they have incurred even if they can avoid payment of or recover damages.

In the wake of the decision, lower UK courts look set to review their guidelines on granting stays of damages inquiries pending the outcome of EPO opposition division decisions – something they have typically declined to do in recent years. UK courts may now consider granting a stay of an infringement action and/or an assessment of damages pending the outcome of any EPO opposition. This may well depend on the status of the opposition and when a final decision is likely to be issued, given that it can take significantly longer (in some cases years) for the EPO to decide an opposition and subsequent appeal than for a UK courts to decide on validity and infringement.

Although the judgment appears to leave the door open for a defendant who has already paid damages to seek to recover them if the patent is revoked years down the line, we can see particular difficulty, for example, where the original defendant is no longer trading or the claimant or defendant has merged with or been taken over by another entity.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking before any action in reliance on it.

Author
Tom Sharman
Partner
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