Aerotel Ltd v Wavecrest Group Enterprises Ltd & Ors

In assessing obviousness, an appellate court should exercise caution before differing from a trial judge’s evaluative conclusion, unless an error of principle is shown.

Commercial success may support non-obviousness, but the patentee must prove that the success resulted from the technical merits of the invention. Where known prior art already solves the asserted problems, an adaptation that changes post-payment credit into prepayment, with credit monitoring and disconnection, may be obvious. Computer modifications needed to implement that change do not themselves supply an inventive step.

Aerotel appealed from the decision of HHJ Fysh QC, sitting as a Deputy High Court Judge, reported at [2008] EWHC 1180 (Pat). The judge held UK patent No. 2,171,877 invalid on grounds including obviousness over the WATS telephone system, Matsuda, and BT systems, and exclusion of subject-matter under Art. 52 of the EPC.

The parties agreed that the Court of Appeal should hear the WATS obviousness issue first. The court concluded that failure on that issue would dispose of the appeal, leaving the central question whether the judge had made an error of principle in finding the patent obvious over WATS.

The appeal was dismissed unanimously. Lord Justice Jacob gave the judgment, with Lord Justice Richards and Lord Justice Sullivan agreeing. Since the finding of obviousness over WATS was upheld, it was unnecessary to hear argument on the other objections, including the subject-matter exclusion objection under Art. 52 of the EPC.

1. Appellate review. The court applied the approach stated by Lord Hoffmann in Biogen v Medeva [1997] RPC 1. Where obviousness involves applying a legal standard that is a matter of degree rather than principle, an appellate court should be very cautious before differing from the trial judge’s evaluation. The appeal therefore required identification of an error of principle, not a fresh evaluation of the evidence.
2. Obviousness framework. The parties accepted the structured four-stage Windsurfing approach stated in Pozzoli v BDMO [2007] EWCA Civ 588: identify the skilled person and common general knowledge; identify the inventive concept; identify differences from the state of the art; and decide whether those differences required invention.
3. Commercial success. Commercial success can be a powerful indication of non-obviousness. The factors identified in Haberman v Jackel [1999] FSR 683 are relevant, including whether success is attributable to technical merit. The patentee bears the evidential burden of proving that causal link. Here, the delay before use, the absence of licensing evidence independent of litigation, the availability of other explanations, and the technical limitations of contemporary telephones meant that the evidence did not establish such a link.
4. Application to WATS. WATS already provided special-code access, routing, usage recording and post-payment account charging. The patent’s remaining differences were attributable to one idea: prepayment. Once prepayment was selected, monitoring the remaining credit and disconnecting the call followed logically. It was not hindsight to consider adapting a known computer-driven WATS system in that way, and the required computer modifications added no inventive step. The evidence concerning BT and the absence of an earlier commercial prepayment variant disclosed no error in the judge’s reasoning.

• Court of Appeal (Civil Division). Dismissed the appeal after upholding the finding that the patent was obvious over WATS.
• High Court of Justice, Chancery Division, Patents Court. HHJ Fysh QC held the patent invalid, including for obviousness over WATS: [2008] EWHC 1180 (Pat).