Schütz (UK) Ltd v Werit UK Ltd & Anor

Section 68 of the Patents Act 1977 concerns the transaction, instrument or event by which a person becomes an exclusive licensee. Once that transaction has been registered, a later variation or replacement agreement with the same licensee does not revive the bar on recovering costs for subsequent infringements. The provision must be construed compatibly with Article 14 of the Enforcement Directive. Its purpose is to identify publicly who controls the patent, rather than to require registration of every later contractual change or the licence’s full terms. A substantial costs sanction for a merely bureaucratic step, where the register already identifies the licensee, would be disproportionate and unfair.

Schütz was the exclusive licensee of a patent under a 1995 licence, which was registered in July 2008. The licence was terminated and replaced by a substantially similar exclusive licence dated 26 November 2009. The replacement licence was not registered.

In earlier judgments the court had decided that the patent was valid and infringed, and had addressed the effect of late registration on damages and costs. The remaining issue was whether section 68 of the Patents Act 1977 prevented recovery of costs incurred after the 2009 licence took effect because that licence had not been registered.

1. The court dismissed Werit’s objection and awarded Schütz its costs from 17 July 2008, the date on which the 1995 licence was registered.
2. Sir Robin Jacob held that, construed in light of the statutory purpose, section 68 refers to the transaction, instrument or event by which the claimant became an exclusive licensee. The public purpose of registration is to identify who has control of the patent. That purpose was fulfilled by registration of the 1995 licence, because Schütz remained the identified exclusive licensee. The statute does not require the complete licence document to be placed on the register.
3. The approach in Finecard v Urquhart Dyke and Lord [2005] EWHC 2481 (Ch.) and Spring Form v Toy Brokers [2002] FSR 17 was not followed. The severity of the sanction, which in this case affected costs said to be approximately £2 million, supported a construction avoiding a disproportionate result. Article 14 of the Enforcement Directive reinforced that conclusion.
4. Lord Justice Patten agreed. He considered that requiring registration of the replacement licence would amount to an unjustified departure from Article 14. The opening words of section 68 therefore refer to the occasion when the claimant first became the exclusive licensee. A change in the licensee’s identity would engage the provision again, but a variation or replacement of the licence held by the same licensee would not.
5. Lord Justice Ward agreed in the result. He considered the literal construction relied on by Werit possible, and consistent with the earlier High Court authorities, but held that it could not prevail against Article 14. He regarded the wider question whether section 68 was compatible with Article 14 in cases of complete non-registration as unresolved, and his observations on that issue were tentative.

• Court of Appeal (Civil Division): In the present judgment, the court dismissed Werit’s objection and awarded Schütz costs from 17 July 2008, including costs after the 2009 licence took effect.
• Court of Appeal (Civil Division): In [2011] EWCA Civ 303, the court decided that Schütz’s patent was valid and had been infringed.
• Earlier judgment in the same litigation: On 29 July, in a judgment cited as [2011] EWHC Civ 927, the court decided that damages were recoverable from the statutory amendment date and that costs before registration of the 1995 licence were barred.
• Chancery Division, Patents Court: The appeal was from the judgment of Mr Justice Floyd, [2010] EWHC 660 (Pat).