Zipher Ltd v Markem Systems Ltd & Anor

An undertaking to the court is a solemn obligation. It should therefore be stated clearly and recorded in writing, although writing is not an absolute condition of validity.

Whether an oral exchange created a binding undertaking is a question of fact. The court must read the exchanges as a whole and in context, avoid over-detailed semantic analysis, resolve real doubt in favour of the person said to be bound, and may consider subsequent conduct.

An offer of an undertaking made during a trial, conditional on a party succeeding, lapses when that party loses unless its terms clearly provide for survival on appeal. A later appellate reversal does not revive the offer. It must be renewed and accepted by the appellate court.

Zipher alleged that Markem infringed its UK patent and corresponding international patents. Markem contended that Zipher was precluded from relying on claims wider than claim 5 because its counsel had given an undertaking in earlier entitlement proceedings before Judge Fysh.

Floyd J held that the patents were invalid and also upheld Markem’s undertaking argument in relation to the United Kingdom in [2008] EWHC 1379 (Pat). In a subsequent judgment, [2008] EWHC 2078 (Pat), he held that the alleged undertaking also extended to the international equivalents. Zipher appealed only the undertaking rulings.

The central issue was whether the oral exchanges before Judge Fysh created a binding undertaking and, if so, whether it survived or revived after Zipher’s successful earlier appeal on entitlement.

1. Appeal allowed. Lord Neuberger, with whom Sir Peter Gibson and Jacob LJ agreed, held that Zipher was not bound by an undertaking not to pursue or enforce claims 1 to 4.

2. An undertaking is a serious promise to the court and should be fully and clearly recorded in writing. The absence of a written record is not conclusive, since the existence of an undertaking is ultimately a question of fact. However, where there is a genuine dispute, the absence of a written undertaking or an order recording it strongly militates against finding one.

3. The exchanges before Judge Fysh, read as a whole and in context, amounted only to an offer of an undertaking. The future-tense language, the conditional origin of the proposal, the lack of settled terms, the absence of a written undertaking, and counsel’s description of an offer to the court supported that conclusion. The court was entitled to consider later events when resolving the meaning and effect of the oral exchanges.

4. The offer was contingent on Zipher being held entitled to claims 1 to 4. It became meaningless and lapsed when Judge Fysh held that those claims belonged to Markem. Even if a binding undertaking had been given, it would have lapsed for the same reason. Its omission from the later order was significant.

5. A trial-stage offer does not survive an adverse first-instance decision and revive merely because an appellate court reverses that decision. Clear language is required to show that it was intended to remain open on appeal. No such language appeared here, and no renewed offer was accepted by the earlier Court of Appeal. The court’s view on that final point was tentative but unnecessary to the result.

• Court of Appeal (Civil Division): Allowed Zipher’s appeal and set aside the conclusion that it was bound by an undertaking: [2009] EWCA Civ 44.

• High Court, Patents Court (Floyd J): Held the patents invalid and held that Zipher was bound by the alleged undertaking in the United Kingdom: [2008] EWHC 1379 (Pat). Held that it also extended to the corresponding international patents: [2008] EWHC 2078 (Pat).

• Earlier entitlement appeal: Zipher had succeeded in obtaining the patent applications in full: [2005] EWCA Civ 267, [2005] RPC 761.