Virgin Atlantic Airways Limited v Zodiac Seats UK Limited (formerly known as Contour Aerospace Limited)

A judgment that a patent is valid and infringed does not prevent the defendant from relying, during an outstanding damages enquiry, on a later retrospective revocation or amendment. The defendant relies on the new legal status of the patent rather than relitigating its former validity.

Cause of action estoppel remains conclusive as to matters actually decided. It does not require damages to be awarded for infringement of claims which, through retrospective revocation or amendment, are deemed never to have existed. Under the Patents Act 1977 and the European Patent Convention, the change operates in rem and against the world.

Virgin owned a European patent covering an aircraft seating system. It brought infringement proceedings against Zodiac, which denied infringement and challenged validity. The High Court held that Zodiac's seats did not infringe. The Court of Appeal reversed that conclusion, declared the patent valid and infringed, and ordered an enquiry as to damages: [2009] EWCA Civ 1062 and [2009] EWCA Civ 1513.

Before damages were assessed, the Technical Board of Appeal of the European Patent Office retrospectively amended the patent by removing all the claims found to have been infringed. The Court of Appeal nevertheless maintained the damages enquiry because it considered its earlier determination to be res judicata.

The central issue was whether Zodiac could rely on the retrospective amendment during the damages enquiry, notwithstanding the final English judgment on validity and infringement.

1. Disposition. The appeal was allowed unanimously. Lord Sumption gave the principal judgment, with which Lady Hale, Lord Clarke and Lord Carnwath agreed. Lord Neuberger, with whom the same Justices agreed, gave additional reasons and agreed with Lord Sumption. Zodiac was entitled to rely on the amendment of the patent in answer to Virgin's claim for damages.

2. Res judicata. Cause of action estoppel conclusively prevents the parties from disputing matters which had to be, and were, decided when the cause of action was established. Its treatment of points not decided is more flexible. Following Arnold v National Westminster Bank plc [1991] 2 AC 93, the estoppel does not invariably exclude reliance on material which could not reasonably have been raised earlier. The doctrines of res judicata and abuse of process are distinct but overlapping rules serving finality and preventing duplicative litigation.

3. Effect of amendment. The Court of Appeal's decision remained binding as to the validity and infringement of the unamended patent. Zodiac was not reopening either issue. It relied on the later fact that the patent had been retrospectively amended and must therefore be treated as never having contained the infringed claims. Under the Patents Act 1977 and article 68 of the European Patent Convention, revocation or amendment operates in rem and retrospectively against the world. The damages enquiry could not enforce monopoly rights which the patentee was deemed never to have possessed.

4. Earlier patent authorities. Poulton v Adjustable Cover and Boiler Block Co [1908] 2 Ch 430 was no longer good law. Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708 was wrongly decided and was overruled, substantially for the reasons given in Lord Neuberger's dissent in that case. Unilin Beheer BV v Berry Floor NV [2007] FSR 635, which depended on Coflexip, was also wrongly decided. A defendant may therefore rely during an outstanding damages enquiry on a patent's later retrospective revocation or amendment, whether effected domestically or by the European Patent Office.

5. Limits and procedure. Different considerations arise after final judgment for an assessed sum. Lord Sumption considered that such a judgment could ordinarily be challenged only by an appeal which remained open. The possibility of reopening or restitution after payment was left unresolved. The guidance in Glaxo Group Ltd v Genentech Inc (Practice Note) [2008] Bus LR 888 on staying English proceedings pending European opposition proceedings should be re-examined, although the Supreme Court did not undertake that review.

• United Kingdom Supreme Court: Allowed Zodiac's appeal unanimously and declared that it could rely on the retrospective amendment of the patent during the damages enquiry: [2013] UKSC 46.
• Court of Appeal: In 2011, following the European amendment, discharged the delivery-up order but maintained the enquiry as to damages on the ground that its earlier validity decision remained res judicata.
• Court of Appeal: Held the unamended patent valid and infringed, granted an injunction and ordered an enquiry as to damages: [2009] EWCA Civ 1062 and [2009] EWCA Civ 1513.
• High Court: Lewison J held that Zodiac's seating system did not infringe the patent, while rejecting most of Zodiac's invalidity grounds.
• European Patent Office: The Technical Board of Appeal retrospectively amended the patent by removing all claims which the English courts had found infringed.