Excel-Eucan Ltd v Source Vagabond Systems Ltd

Patent infringement by equivalents requires two stages: normal, purposive interpretation of the claim, followed, where necessary, by consideration of whether the variant is an immaterial variation. The Actavis questions are guidelines, not rigid rules. The inventive concept must be identified by reference to the problem underlying the invention and its inventive core, rather than by treating every claim feature as essential. A different method of operating the product will not prevent equivalence where it achieves substantially the same result in substantially the same way and strict compliance with the claim was not intended to be essential. A contractual royalty clause may extend to an infringing variant even where patent validity remains unresolved. An inquiry into damages will not be ordered where no identifiable loss is pleaded or advanced. Contractual indemnity provisions are relevant to, but do not determine, the court’s broad discretion on costs.

Excel held a patent for an ammunition bag and had licensed Source to manufacture and supply related products to the Ministry of Defence. After Source developed a zipless 2017 ammunition bag, the parties disputed whether it infringed the patent, whether it attracted royalties under the licence, and whether Excel was entitled to an inquiry into damages following Source’s purported termination of the agreement.

Source sought a declaration of non-infringement. Excel relied on the doctrine of equivalents. The court also had to determine the contractual royalty issue, the damages application, and the relevance of a contractual costs indemnity.

1. Patent infringement. Source was not entitled to a declaration of non-infringement. The 2017 Bag did not infringe on a normal interpretation of the amended claim because it lacked an openable closure extending substantially from end to end.
2. The court applied the two-stage approach in Actavis UK Ltd v Eli Lilly & Co [2017] UKSC 48. Normal interpretation involves purposive interpretation through the eyes of the skilled person. If there is no infringement at that stage, the court asks whether the variant nevertheless achieves substantially the same result in substantially the same way, whether that would have been obvious to the skilled person, and whether the skilled person would have understood strict compliance with the claim to be essential.
3. The inventive concept was the bag’s “plug and play” functionality: convenient carriage of linked ammunition combined with rapid, direct firing from the bag without removing the ammunition from its protection. The openable closure was not an essential part of that concept. Horizontal and vertical concertina loading achieved substantially the same result in substantially the same way. The answers to the first two Actavis questions were yes, and the answer to the third was no. The 2017 Bag therefore fell within the footprint of GB’116 by equivalence.
4. Royalties. Source accepted that clause 3 of the Licence Agreement extended to changes and reconfigurations producing a product within the patent’s footprint. The 2017 Bag was therefore royalty-bearing. That conclusion applied whether or not GB’116 was ultimately held valid by the UKIPO, because clause 9.5 contained no representation or warranty as to patent validity or relevance.
5. Damages and costs. No inquiry into damages was ordered. Excel identified no relevant loss, and the proposed recovery would effectively impose a guaranteed minimum royalty not found in the Licence Agreement. The court reserved costs. A contractual indemnity was a relevant circumstance, but the ultimate costs order remained discretionary under section 51 of the Senior Courts Act 1981.

First-instance decision of the High Court (Patents Court). No appellate history is stated in the judgment.