Schütz (UK) Ltd v Werit UK Ltd & Anor (Rev 1)

Section 68 of the Patents Act 1977 does not impose a continuing disability on costs once a relevant transaction has been registered. The costs bar applies only so far as the claim concerns infringements during the period of non-registration. Costs relating to later infringements remain recoverable under the usual rule. The amendment to section 68 is not retrospective: pre-amendment infringements remain incapable of supporting compensation, but the amended costs disability applies only to costs relating to post-amendment infringements before registration. Section 68 operates as a statutory restriction on the court’s power, rather than as a defence which must be pleaded.

Schütz, the exclusive licensee of a patent, appealed from the Chancery Division Patents Court judgment reported at [2010] EWHC 660 (Pat). The Court of Appeal had previously held that the patent was valid and infringed: [2011] EWCA Civ 303. The licence was registered on 17 July 2008, and the action commenced on 7 August 2008.

After Schütz succeeded, Werit raised section 68 of the Patents Act 1977, contending that no compensation was recoverable for earlier infringements and that no costs could be awarded. The central issues were whether the point could be raised late, the temporal scope of the costs and compensation restrictions, and the effect of a later unregistered licence.

The court rejected Werit’s contention that section 68 created an all-or-nothing bar on costs, but accepted that the statutory point could be raised late.

1. Nature of the statutory bar. Section 68 is framed as a prohibition on what the court may award, rather than as a defence which must be pleaded. Werit could therefore rely on it despite not having raised it earlier. The court did not need to decide whether the point had been properly raised; if that issue had mattered, late reliance would have been refused because Schütz might have changed its position, including by entering and registering a new licence.
2. Temporal operation. Each infringement is a separate wrong. Where a claim covers a period during which a relevant transaction was unregistered when it should have been, the costs disability applies only to costs attributable to infringements during that non-registration period. Costs relating to infringements after registration remain recoverable in the usual way. Section 68 does not require the patentee to elect between recovering compensation for later infringements and recovering costs.
3. European context. The amended section had to be construed in light of article 14 of Directive (2004/48/EC). In that context, equity means unfairness, not the pre-Judicature Acts body of English equitable law. It was not unfair to award Schütz the costs incurred after registration, when Werit had unsuccessfully resisted the claim during that period.
4. Pre-amendment infringements. Following Mann J’s decision in Siemens, reported at [2008] RPC 4, the amendment was not retrospective. No compensation was recoverable for infringements before 29 April 2006. The additional costs disability applied only to costs concerning infringements after that date and before registration.
5. Later licence. The court left open the effect of the further exclusive licence entered into on 26 November 2009. It questioned whether Spring Form v Toy Brokers, reported at [2002] FSR 276, was necessarily correct or applicable, and adjourned the issue for further argument.

• Court of Appeal (Civil Division): In the present judgment, the court determined the principal construction issues under section 68, but adjourned the question of costs after 26 November 2009.
• Court of Appeal (Civil Division): In the earlier merits judgment, reported at [2011] EWCA Civ 303, the court held that the patent was valid and had been infringed.
• Chancery Division Patents Court: The appeal arose from the judgment of Mr Justice Floyd reported at [2010] EWHC 660 (Pat).