Schütz (UK) Limited v Werit (UK) Limited

Replacing a component of a patented product amounts to “making” the product only where that conclusion follows from a practical, contextual assessment of fact and degree. Relevant matters include the component’s expected life, replaceability, physical and functional significance, connection with the inventive concept, independent identity and the nature of the work performed.

The inventive concept is relevant but cannot determine the issue by itself. Whether the activity constitutes repair may provide a useful cross-check. A statutory restriction on damages or costs ordinarily must be pleaded even when expressed in mandatory terms. Under section 68 of the Patents Act 1977, costs attributable to pre-registration infringements are irrecoverable, while costs attributable to post-registration infringements may be recovered.

Schütz was the exclusive licensee of a patent claiming an intermediate bulk container comprising a pallet, a replaceable plastic bottle and a metal cage whose weld construction embodied the inventive concept. Werit supplied replacement bottles to Delta, a reconditioner which removed damaged Schütz bottles from used patented containers, repaired the cages where necessary and fitted Werit bottles.

Floyd J held in [2010] EWHC 660 (Pat) that replacing the bottle did not “make” the patented product for the purposes of section 60(1)(a) of the Patents Act 1977. The Court of Appeal reversed that conclusion in [2011] EWCA Civ 303. It also decided questions concerning the effect of Schütz's delayed registration as exclusive licensee in [2011] EWCA Civ 927 and [2011] EWCA Civ 1337.

The principal issue was whether replacing the bottle amounted to making the patented container. Further issues concerned pleading and applying the restrictions imposed by section 68 on relief and costs.

1. Appeal allowed unanimously on infringement. Lord Neuberger, with whom Lord Walker, Lady Hale, Lord Mance and Lord Kerr agreed, held that Delta did not “make” the patented container by replacing its bottle. Werit therefore did not infringe the patent through supplying replacement bottles.

2. The statutory question is whether the alleged infringer makes the product identified by the patent claim. “Makes” is an ordinary, imprecise word which must be interpreted practically and contextually. Whether replacement of a component amounts to making the patented product is commonly a matter of fact and degree. The court must preserve reasonable certainty, protect the patent monopoly without stifling reasonable competition, and recognise that the provision applies to many kinds of product.

3. The Court of Appeal had treated United Wire too readily as controlling the result. Replacement of any essential component does not necessarily amount to making the claimed product. Floyd J's alternative formulation was also too simple: the question cannot be decided solely by asking whether the retained part embodies the whole inventive concept.

4. A court may consider whether the replaced component is sufficiently subsidiary that its replacement does not make a new article. Relevant matters included its anticipated replacement during the product's life, comparative durability and physical substance, connection with the inventive concept, independent identity, integration with retained components and the character and extent of the work. The inventive concept is relevant but is not a conclusive test. The change in market value may also be relevant, although cautiously.

5. The bottle was free-standing and readily replaceable, had a much shorter life than the cage, contained no part of the inventive concept and was not the main component. Delta performed no work beyond replacement and routine cage repairs. Those factors outweighed the bottle's size and essential function. Considering whether the activity was repair provided a useful cross-check and supported the same conclusion.

6. The section 68 issues were academic and the conclusions upon them were obiter. Reliance on section 68 ordinarily had to be pleaded, notwithstanding its mandatory wording, but Werit's pleading was sufficient. Where a registered licensee successfully claims for pre- and post-registration infringements, costs must be apportioned: costs attributable to pre-registration infringements are irrecoverable, while those attributable to post-registration infringements remain recoverable. The effect of replacing one licence with another was left open.

1. United Kingdom Supreme Court: Allowed Werit's appeal from [2011] EWCA Civ 303 and restored the conclusion that replacing the bottle did not make the patented product. The section 68 appeal consequently became academic.
2. Court of Appeal: In [2011] EWCA Civ 303, reversed Floyd J on infringement and held Werit liable. It subsequently addressed section 68 in [2011] EWCA Civ 927 and [2011] EWCA Civ 1337, reaching conclusions favourable to Schütz.
3. High Court, Patents Court: In [2010] EWHC 660 (Pat), Floyd J held that replacing the inner container with a Werit bottle did not amount to making the patented product.