Thursday, 31 March 2011

Declining to deal: how complex does it need to be?

Who should be entitled to a patent?  Or, in the case of a pending application, who is entitled to have the patent that could result?  Section 7 of the UK Patents Act says that any person may make an application for a patent alone or jointly with another, but then goes on to say that a patent may only be granted to an inventor or (to paraphrase somewhat) his legal successor in title.  To account for the fact that most inventions are made by people who are employed for the purpose, Section 39 says that such inventions will (usually) belong to their employer.

The upshot of all this is that, under UK law, an application for a patent could be made by someone who does not have the right to be granted a patent for the invention.  There is nothing to stop such a patent being granted (notwithstanding the wording of Section 7), but there are provisions that could stop that person from keeping hold of the patent.  Sections 8 and 12 allow for the situation where someone who would have been entitled to be granted a patent for the invention to have the application or patent transferred to them.

Decisions arising from applications under sections 8 and 12 are not very common.  To see two come out of the UK-IPO in quick succession, both of which deal with these sections, is therefore a bit surprising.  Not only this, but both relate to the same question of whether the IPO was the right place for the question of entitlement to be decided.  Under Sections 8(7) or 12(2), the comptroller can decline to deal with an issue of entitlement if it appears to him that it would be better dealt with by the courts.

The first of these, Amir Azam v Carl Livesey (BL O/438/10), related to an international application that was filed naming the defendant (Mr Livesey) as sole inventor and applicant, and claiming priority to two GB applications. The subject matter of the application related to providing additional information to the viewer of a moving image file, in which the viewer could request information on, and place orders for, products displayed in the image file. The claimant (Mr Azam) initiated proceedings before the comptroller under section 12(1), claiming either sole or joint entitlement to the application on account of being a sole or joint inventor. 

As part of the rounds of evidence, the defendant presented an assignment document that apparently transferred all rights from the claimant to a company controlled by the defendant. The effect of this document was disputed by the claimant. The hearing officer invited submissions regarding whether, as a result of the nature of the disputed evidence, the comptroller should decline to deal with the reference according to section 12(2), as the matter might be more properly dealt with by a judge. The claimant consented to the matter being transferred but the defendant did not.

The dispute centred on whether the claimant had in fact contributed to the development of the invention before the priority date. Evidence in support of the defendant being the sole inventor was presented in the form of video files showing the concept of the invention, which were apparently dated before a meeting had first taken place between the parties. The claimant alleged that this evidence had instead been created after the dispute arose.

In relation to whether the comptroller should decline to deal with the reference under section 12(2), the hearing officer referred to guidance given by Warren J in Luxim Corporation v Ceravision Limited [2007] EWHC 1624 (commented on by the IPKat here), and in particular to what would constitute a 'complex' matter that would justify a case being more properly dealt with by a judge. Different types of issues, such as technical, factual or legal issues, would be judged differently according to who was handling them. Complex technical or patent law matters, for example, could usually be handled by a hearing officer, while complex factual and non-patent law issues might be more properly dealt with by a judge.

The hearing officer considered that there were no particularly complex technical or patent law issues to be dealt with. The factual and non-patent law issues, however, included allegations of falsifying evidence and matters of contract law, which were serious matters that might be more appropriately handled by a judge. Overall, the hearing officer determined that the reference involved matters that would be more properly determined by the court and declined to deal with the matter in accordance with section 12(2). The claimant was then given a short extension of time to the normal set period of 14 days under CPR rule 63.11(2) within which to bring proceedings before the court, on account of the upcoming Christmas period.

The second decision, Mastermailer Holdings plc v Data Security Ltd. & Stephen Black (BL O/433/10), also related to an international application, which had been filed in the name of the first defendant (DSL) and named the second defendant (SB) as inventor. The claimant (MH) requested that the application, and subsequent national phase applications, proceed instead in their name as a result of a previous relationship in which MH had contracted services from DSL and due to SB's fiduciary duties in his role as director or employee of companies within the same group as the claimant. High court proceedings were also being pursued by the claimant against SB for misappropriation of funds. As a result, the claimant requested that the IPO decline to deal with the application under Sections 8 and 12 so that they could consolidate the case with the ongoing high court proceedings.

The hearing officer, again referring to Luxim v Ceravision,  considered that the comptroller's discretion to decline to deal should be exercised if the case was complex when judged against the expertise to be expected of a hearing officer as compared with a judge. A further issue to be considered in this case was whether there was a significant overlap between the matters under consideration in relation to the ongoing high court proceedings.

The claimants had put the question of fiduciary duty owed by SB at issue, and this was relevant to the question of ownership of the applications. SB's fiduciary duty as director was also in issue in the high court proceedings. There was therefore a degree of overlap, which meant that there was likely to be some evidence in common in determining the two questions. The hearing officer also considered that the allegation of breach of fiduciary duty was one that might normally be expected to be more appropriate for a judge to deal with. The hearing officer determined that the question referred was consequently one more properly determined by the court, and declined to deal with the application.

Another interesting aspect to the second case is that the corresponding European application, EP07824696,  is currently on hold as a result of the application made to the UK IPO.  Under Rule 14 EPC, proceedings before the EPO can be stayed if entitlement proceedings have been instituted according to Article 61 EPC. While the UK case continues, the European application will therefore not be allowed to proceed, but cannot be withdrawn.  The renewal fees, however, continue to become due while the application is stayed.  A good summary of the situation in this case was provided by the EPO legal division to the applicant, available from the register here.

These two cases are good illustrations of how far issues can be handled by IPO before they become too involved.  The boundary seems to be reached once issues are brought into play such as allegations of fraud or other difficult areas outside the remit of the Patents Act. The IPO may be a good place to settle issues that relate to complex technical issues, but we should apparently not expect hearing officers to be judges.  I wonder though whether unscrupulous claimants, wishing to escalate proceedings for whatever reason, could use the fact that hearing officers will in some cases decline to deal to get the matter 'bumped up' to the courts, with all the resulting increase in complexity and cost that this results.

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