Halliburton Energy Services Inc v Smith International (North Sea) Ltd & Ors

The Court of Appeal will not normally restore a patent revoked by the court below merely because the parties consent following settlement. The patentees must demonstrate on a substantive appeal that the decision was wrong. Setting aside or varying an order without determining the merits requires good and sufficient reasons.

Where such an appeal becomes one-sided, the Comptroller need not be directed to participate. The Comptroller may decide whether assistance can usefully be provided after considering the appellant’s skeleton argument. The patentees may be required to meet the reasonable costs of that participation and of any scientific adviser, even if the appeal succeeds.

Halliburton sued Smith International and related companies for infringement of two European patents. Pumfrey J held both patents invalid. Halliburton appealed, but a worldwide settlement then removed the respondents’ wish to resist the appeal.

Halliburton nevertheless sought restoration of the patents through a ruling that the first-instance decision was wrong. The Comptroller contended that a revocation order could not be reversed by consent without the Court of Appeal satisfying itself on the merits. The preliminary issues concerned whether the appeal required a substantive hearing and what assistance should be obtained from the Comptroller and a scientific adviser.

Held, directing a substantive hearing and adjourning the application to that hearing.

1. Jacob LJ held that the Court of Appeal should not restore a patent held invalid below unless the first-instance decision was shown to be wrong. Paragraph 13.1 of the Practice Direction to CPR Part 52 stated that an appellate court would not normally allow an appeal unless satisfied that the lower court was wrong. Although the court could set aside or vary an order by consent without determining the merits where good and sufficient reasons existed, the established practice of restoring patents without argument was generally inappropriate. The merits of this appeal therefore had to be heard.

2. The Comptroller would not be directed to attend. The dispute raised no sufficient question of general public or Patent Office interest to justify mandatory intervention, and the difficult drilling technology would make effective participation expensive. After receiving the appellant’s skeleton argument, however, the Comptroller could decide whether useful assistance could be provided.

3. If the Comptroller participated, Halliburton was to pay the Comptroller’s reasonable costs, subject to assessment. That liability would remain even if Halliburton ultimately succeeded. Halliburton had commenced the litigation, lost its patents at first instance and sought determination of an otherwise one-sided appeal after settlement.

4. The court should have the assistance of a scientific adviser in principle. The adviser might be a Patent Office examiner if the Comptroller did not participate, although no particular appointment was settled. Halliburton was to bear the adviser’s costs.

5. The Office of Fair Trading had advised that competition law would not prevent the court from allowing an appeal and restoring a patent by consent. Any competition-law infringement inherent in the settlement agreement would be a separate matter and would not concern this procedural decision.

Rix LJ agreed. The application was adjourned to the substantive appeal hearing. The costs of the scientific adviser were payable by Halliburton, while the costs of the application were reserved.

• Court of Appeal (Civil Division): By [2006] EWCA Civ 185, directed that the appeal be heard substantively rather than allowed as a formality. It also made directions concerning possible participation by the Comptroller and assistance from a scientific adviser.
• High Court, Chancery Division, Patents Court: Pumfrey J held the two European patents invalid. No citation for that decision is stated in the judgment.