Vodafone loses its appeal in patent case: unjust, or simply inevitable?

This article was first published by IPKat on 23 February 2023.

In a rare turn of legal decision-making, Vodafone has paid almost £1 million in costs for infringing a patent since revoked by the European Patent Office (EPO) – a state of affairs that the Court of Appeal says it cannot overturn. Is this injustice or the inevitable result of an avoidable situation?

In Vodafone Group Plc & Ors v IPCom GmbH & Co KG, Vodafone has come in for some fairly harsh criticism from the Court of Appeal judges, who have called it 'the author of its own misfortune'.

IPCom, an active patent enforcer, prevailed in the latest round of its infringement action against Vodafone, despite its patent having been revoked by the EPO. On 10 February 2023, the Court of Appeal handed down its judgment, refusing to permit the revision or revocation under CPR rule 3.1(7) of the sealed final order it had previously made.

This effectively bars Vodafone from claiming the reimbursement of costs it has already paid in compliance with that order, even though IPCom now ostensibly has no cause of action. Vodafone will doubtless be unhappy at what it likely perceives as the court's refusal to use its inherent jurisdiction to dispense justice.

Background

Vodafone had been held to infringe a valid patent owned by IPCom at first instance and on appeal. Following the appeal, Vodafone paid just under £1 million for IPCom's costs, and an inquiry into damages was ordered.

Vodafone applied to the Supreme Court for permission to appeal (the Court of Appeal having refused permission). The EPO had by then revoked the patent, which made it invalid ab initio – meaning Vodafone had paid the costs of an action which now had no legal foundation.

Vodafone applied to amend its grounds of appeal to the Supreme Court, essentially seeking its costs (at the time of writing, both its application to amend its grounds of appeal and its application for permission to appeal await the Supreme Court's decision).

Meanwhile Vodafone sought to have the Court of Appeal's order against it (giving a declaration of infringement, an order for inquiry into damages and a costs order – all of which still stood) varied or revoked. Vodafone applied under CPR 3.1(7), but not under CPR 52.30, which the Court of Appeal had advised, to reopen/revoke the order. These rules state as follows:

1. CPR rule 3.1 (7):
 
(1) A power of the court under these Rules to make an order includes a power to vary or revoke the order.
 
2. CPR rule 52.30:
 
(1) The Court of Appeal or the High Court will not reopen a final determination of any appeal unless—

(a) it is necessary to do so in order to avoid real injustice;

(b) the circumstances are exceptional and make it appropriate to reopen the appeal; and

(c) there is no alternative effective remedy.

The Court of Appeal's decision

The Court of Appeal considered numerous authorities (including some with similar fact patterns involving parallel UK and EPO proceedings) and concluded that:

"[t]he overwhelming thrust of the authorities is that the court's power under CPR rule 3.1 (7) to vary or revoke orders either cannot or should not be used to discharge a sealed final order. The only limited exception … is the case of a continuing order (such as a final injunction)." 
 
The application under rule 3.1(7) was refused.

The Court of Appeal made numerous comments on rule 52.30, which, while obiter, pointed to what would have been the right route to pursue. Indeed, the Court of Appeal had indicated the same to Vodafone months earlier.

It appears that Vodafone believed it fell outside rule 52.30 as its application for permission to appeal to the Supreme Court was still outstanding (and that therefore it was not in the position of having 'no alternative effective remedy').

The Court of Appeal disagreed; it believed that it likely did have jurisdiction and would also have jurisdiction if the Supreme Court refused permission and if Vodafone withdrew its application for permission. The Court of Appeal did not, however, discuss what it considered the test to be under that rule.

The Court considered that Vodafone could have (but did not):

-  Pursued its much earlier application for a stay of the trial, which would almost certainly have been granted given the concurrent EPO opposition proceedings;

-  Requested undertakings from IPCom to repay any damages paid which turned out to have been baseless;

-  Applied to stay or adjourn the appeal pending the EPO Board of Appeal's decision;

-  Applied for the Court of Appeal to adjourn the question of costs and other relief;

-  Asked the Court of Appeal to make the costs order contingent on the EPO outcome;

-  Asked the Court of Appeal for liberty to apply to revoke the Court of Appeal order in the event the EPO revoked the patent; and/or

-  Applied to stay the costs order.

Lewison LJ commented that "[a]lthough these are well-trodden paths for experienced patent litigators, in fact Vodafone did none of these things." His fellow judges were no more complimentary about Vodafone's strategy.

Implications

The case serves as a cautionary tale and shows the importance of good advice and familiarity with the intricacies of the CPR, as well as of pleading alternatives where available.

It does, however, feel a little unsatisfactory; is it right that a patentee can bring a dispute, have significant costs paid in its favour and then keep those costs after it turned out to have lost the dispute after all, this simply because procedural boxes had not been ticked?

The public interest in finality of judgments would suggest the answer to that question is indeed - 'Yes'.