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Virgin v Delta - aircraft seats: When is supply of parts for assembly into a product an infringement of a patent?

Introduction

The recent decision of Justice Arnold granting Summary Judgment in the High Court in Virgin Atlantic Airways Limited v Delta Airways, Inc [2010] EWHC 3094 (Pat) Case No: HC08C1577, 30 November 2010 raises a number of interesting questions in relation to whether a party can be liable for direct infringement of a patent by dealing in/supplying a kit of parts for assembly into a complete product. Whilst a Summary Judgment in a patent case is very unusual in itself, perhaps the more controversial core issue was the interpretation of the scope of direct infringement under section 60(1) of the Patents Act 1977 and its interrelationship with section 60(2).

Does the decision firmly clarify and establish a clear kit of parts doctrine or does it create further uncertainty opening up commercially artificial loopholes for would be infringers? The decision is subject to appeal. However it deserves close analysis as it dealt with a relatively untested point of patent law and has potentially wide significance in relation to the drafting of patent claims in the future as well as liability for infringement. The latter is particularly the case where two or more parties are involved in the supply of various parts/means required to put a patent into effect and/or the ultimate assembly of the finished product.

This article will firstly set out the background to the dispute and the issues which the Court had to address. Secondly, it will analyse the interpretation of sections 60(1) and 60(2) of the 1977 Act and in particular whether the distinction between providing a kit of parts (complete or otherwise) for assembly within the UK as opposed to outside the UK is a valid and realistic one in today's global manufacturing and supply economy. Lastly, the practical implications and potential impact of the decision will be considered. This involves looking at whether the decision clarifies the legal position or emphasises a potential lacunae in the current UK and European patent legislation which may, unless overturned on appeal, provide a defence for many would be infringers.

Background

Delta applied for Summary Judgment for dismissal of Virgin's claim that Delta was jointly liable for infringement of one of its European (UK) patents. Before setting out the issues Justice Arnold had to consider, it is necessary to discuss the preceding parallel dispute which gave rise to the claim against Delta.

The Contour litigation

In 2007 Virgin commenced proceedings against Contour (trading as Premium Aircraft Interiors UK Limited) alleging both patent and unregistered design right infringement. These related to the same patent being litigated in the Delta case. Virgin's patent related to a passenger seating system for use in first and business class cabins. Virgin alleged that Contour's manufacture of a seat design called the Solar Eclipse, for a number of airlines including Delta, infringed its' patent and unregistered design right. At first instance [2009] EWHC 26 (Pat), both infringement claims were rejected, but the patent was held to be valid. On appeal [2009] EWCA Civ 1062, the Court of Appeal held that Contour did infringe the patent and upheld the validity ruling.

It is important to note that although Contour manufactured the various elements making up the Solar Eclipse chair in the UK, all assembly of the seating units took place outside of the UK. The assembly was carried out by the aircraft manufacturer or the airline's appointed maintenance provider inside the actual aeroplane (in Delta's case in the United States of America). The Court of Appeal conclusion that Contour did infringe Virgin's patent was based on the wording of the relevant patent claims at the time of the decision.

However subsequent to that ruling, in September 2010, the Technical Board of Appeal of the European Patent Office upheld the relevant European (UK) patent but in an amended form which amended the main independent claim in suit as well as the features of various dependent claims. The amended claims had not been considered by either the High Court or Court of Appeal. In broad terms the significance and import of the amendments, as interpreted by Justice Arnold, were that the claims were limited to a seating system assembled and arranged in a particular manner in an aircraft and did not include a number of seating units capable of being assembled in an aircraft.

Prior to the trial in the Contour case, Virgin commenced proceedings against Delta alleging that it was jointly liable with Contour for its acts of patent and design right infringement. The claim against Delta was one of joint liability for acts of patent infringement committed by Contour. Furthermore, the claim against Delta was limited to direct infringement under section 60(1)(a) of the 1977 Act as no claim for indirect infringement could be made against Contour in terms of section 60(2) as the assembly and hence putting the invention into effect was done outside the UK. Thus whilst the essential elements of the invention had been provided by Contour from within the UK the patented seated system was not being put into effect within the UK.

Application for Summary Judgement
Delta sought Summary Judgment on the basis that the claim as amended was limited to a passenger seating system assembled and arranged on an aircraft, noting that as Contour had never assembled and arranged a number of seats into a seating system on an aircraft in the UK, there could be no infringement and hence no joint liability on the part of Delta. Essentially Delta argued that Contour were providing an incomplete kit of parts from the UK for assembly into a patented product outside the UK, as the correct interpretation of the claim was to a seating system requiring an aircraft which Contour did not make or supply. Virgin argued that the proper construction of the claim did not limit it to a passenger seating system assembled and arranged on an aircraft. Rather it covered a number of seat units which were adapted to and capable of being assembled and arranged on an aircraft. Furthermore liability for the provision of a kit of parts in the UK was a novel area and inherently fact-specific meaning that summary disposal was not appropriate.

Therefore Justice Arnold firstly had to consider whether Summary disposal was appropriate, such that he was in a position to interpret the amended claims (which had not been before the High Court or Court of Appeal in the Contour case) and then go on to determine whether Virgin had any realistic prospects of successfully claiming infringement against Delta at trial.

Whilst the most relevant aspect of the decision is the court's assessment of liability for the provision of a kit of parts, it is worth briefly noting why Summary Judgment was deemed appropriate. This was a fairly unique set of circumstances as clearly Summary Judgment is rarely possible or appropriate in patent cases. This is because issues of infringement and validity require the court to interpret the scope of the claims and the alleged infringement through the mantle of the skilled man, which in most cases requires independent expert witness evidence. In this case the same European (UK) patent and the alleged infringing seat design had been considered both at first instance by the High Court and on appeal by the Court of Appeal in the Contour case. There had been substantial agreement as to key issues such as who the skilled man/team would be and on the relevant common general knowledge. Furthermore, both Virgin and Delta (the latter at least for the purpose of Summary Judgment) were prepared to accept the findings of the courts in the preceding Contour case. Therefore Justice Arnold decided that he was in a position to interpret the relevant patent claims and, if appropriate, grant Summary Judgment.

The unique circumstances here with regard to the long-running background litigation mean that it is very unlikely that this decision will result in an increase in Summary Judgments in patent cases. However the ruling does highlight that such summary disposal may be appropriate in specific cases.

The decision

For the purpose of its summary application Delta had agreed to accept the findings of the courts in the Contour case. These had resulted in a finding of liability for Contour and hence Delta as a joint infringer. Despite this Justice Arnold agreed that Delta could dispute that Contour's activities had infringed the claim as amended. That was because the Court of Appeal had made no finding in relation to the amended claim.

Interpretation of the claims

Therefore having decided that Summary Judgment was a possibility, the first key issue for Justice Arnold to decide was whether the amended claim was limited to a seating system in which the seating units had been assembled and arranged in a particular way on an aircraft or whether the scope of protection extended to seat units which were merely capable of being assembled and arranged in that way. Contour was alleged to have assembled a number of seat units together in the UK so that customers such as Delta could see how the units would fit together on an aircraft. The Judge stressed that the scope of protection depended on the language specifically chosen and selected by Virgin and concluded that the relevant claim was limited to a number of seat units assembled and arranged on an aircraft (i.e. in the United States in this case). Patented protection did not extend to a number of such seat units (essentially a kit of parts) which were merely capable of being ultimately assembled and arranged in an aircraft. It was felt that the wider interpretation would result in uncertainty as to when a party was infringing or not - for example would the possession of 2 seat units in the UK amount to infringement?

Liability for direct infringement by supplying a kit of parts?

Having interpreted the relevant claims, the fundamental question for the court was whether there could be infringement under section 60(1) of the 1977 Act by dealing in a kit of parts. Did it amount to infringement to make, dispose of, offer to dispose of or keep in the UK a complete or indeed an incomplete kit of parts for assembly by a 3rd party outside the UK into the seating system falling within the scope of the product claim in the European (UK) patent?

As set out in more detail in the analysis below, the decision was that an incomplete kit of parts could not constitute infringement when assembly of that kit of parts takes place outside the UK. As this decision could have significant commercial repercussions in the global manufacture and supply market where for reasons of practicality or cost many items may be provided in kit form, it is worth analysing the decision and its potential scope in more detail.

Analysis of sections 60(1) and 60(2)

Virgin's claim of infringement against Delta for joint liability was limited to direct infringement by Contour under section 60(1)(a). To be able to take forward that and survive summary disposal, Virgin had to demonstrate that it had a reasonable prospect of successfully demonstrating that Contour's offering of a kit of parts to Delta amounted to the provision of a complete final product falling within the product claim.

Whilst no allegation of indirect infringement under Section 60(2) was made, Justice Arnold stressed it was important to consider the purpose behind both sub-sections and in particular ensure that liability for direct infringement was interpreted in a manner consistent with the scope of indirect infringement. As readers will be well aware sub-section (2) provides that a person infringes a patent if they supply or offer to supply in the UK the means allowing the essential element of the invention to be put into effect where they know, or it is obvious to a reasonable person in the circumstances (the test for such knowledge was recently clarified in the High Court decision Grimme Landmaschinenfabrik GmbH & Co Kg v. Scott (trading as Scott's Potato Machinery) [2010] EWCA Civ 1110) that those means are suitable for putting, and are intended to put, the invention into effect in the UK.

A key part of the basis for Justice Arnold's ultimate decision (and essentially his conclusion that neither the UK or foreign cases referred to during the hearing clearly established liability for the provision of an incomplete kit of parts) was that section 60 is based on an international agreement as to what activities can amount to patent infringement. Any extension of such protection was thus not a matter to be taken lightly. The agreement in question is the 1975 Community Patent Convention. Although it was never fully ratified or given effect, it did introduce harmonization into many national patent laws in anticipation of its entry, and in particular Section 60 of the Patents Act 1977.

The double territorial requirement

Justice Arnold referred to the decision of Lord Justice Aldous in the Court of Appeal decision in Menashe Business Mercantile Limited v. William Hill Limited [2002] EWCA Civ 1702 on the scope of section 60(2). That case also concerned a product claim and Lord Justice Aldous decided that putting the invention into effect required the provision of means intended to put the apparatus/product claim into effect and thus essentially to put the product into an infringing state in the UK. This requires both the supply of the means and that the use should take place in the UK.

Accordingly, Justice Arnold agreed that for any infringement under section 60(2) a double territorial test had to be fulfilled. Firstly, the supply or offer of the essential element of the invention had to take place in the UK. Secondly, and here fatal to the Virgin's claim when transposed to section 60(1), the essential means provided must be suitable and intended for putting the invention into effect in the UK. Therefore whilst Contour had supplied or offered to supply seat units which were an essential element of the invention to Delta in the UK, the seat units were assembled and arranged into the claimed seating system in the USA.

Whilst liability for direct infringement is a separate and distinct head of liability, the court was not prepared to interpret or apply section 60(1) in a manner inconsistent with the second territorial limitation in section 60(2). This has significant repercussions for the scope of liability under Section 60(1) when dealing with a kit of parts type scenario.

Section 60(1)

Turning to Section 60(1) Justice Arnold decided that a claim to a product consisting of a number of parts is not infringed by the manufacture, disposal, offer for disposal or keeping within the relevant territory of an incomplete kit of parts for assembly into that product where the defendant's customer obtains from elsewhere or itself provides the missing part or parts and the assembly is in actual fact carried out outside the UK.

However, taking account of the present state of European patent law, it was accepted that it may be arguable that dealing in a complete kit of parts, even for assembly outside the UK, could amount to direct infringement of a patent. In such a scenario factors such as the detail of any accompanying assembly instructions, the role of the provider of the kit in any subsequent supervision or inspection of the assembly, the ease of assembly and the practicalities requiring provision in a kit form would have to be factually investigated.

UK supply with no foreign territory involvement

Justice Arnold did not consider, at least intra UK, that his interpretation of section 60(1) would limit its effectiveness or purpose, such that a new doctrine of liability for dealings in a kit of parts was required. His view was that when a complete kit of parts was provided for assembly in the UK then inevitably there would be indirect infringement under Section 60(2). The same should be the case whether there is a supply of or offer to supply an incomplete kit of parts, provided that the essential elements of the claimed product was provided, and the customer obtains or provides the missing element. In addition if an incomplete kit was supplied, together with instructions for assembly of that kit, then it was anticipated that most legal systems would hold the provider jointly liable as an accessory to the infringement when the customer assembles the complete kit.

UK supply with foreign territory involvement

However, where there is any extra territorial aspect to the case (as there was here) it was decided that the provision of an incomplete kit of parts for assembly outside the UK would not amount to infringement as that would disregard the second territorial limitation of putting the invention into effect in the UK. It is this element of the decision which could give rise to concerns over infringers escaping liability by putting an ex UK scheme into effect.

Therefore where Delta obtained the aircraft in which the assembly was to take place from elsewhere and the seats were actually assembled and arranged in the aircraft outside the UK, neither Contour or Delta could be liable for any infringement. Accordingly Summary Judgment was granted in favour of Delta.

Practical effect and implications of the decision

As things stand the decision lays down what could be viewed as an overly strict literal interpretation of liability under section 60(1). To establish liability for direct patent infringement where a kit of parts is involved either the assembly of the kit into a complete product falling within the scope of the relevant claim must be carried out in the UK or the kit provided from the UK must at least contain all of the claimed integers and thus be a complete kit.

Clearly the nature of the patent system means that territoriality of protection must always be factored in to limiting the valid scope of the granted monopoly. Equally the precise wording of the claims in suit will always be the touchstone in the assessment of any liability. In this particular case, the court's interpretation of the product claim requiring the aircraft to be part of the completed seating system significantly contributed to the finding of non-infringement. This may well result in even tighter patent drafting with the aim of avoiding such a scenario.

Whilst the Judgment is a very robust and thorough one and thus could very well stand up on appeal, many may feel that the court has drawn an artificial distinction between the provision of a kit of parts, complete or otherwise, intended to be assembled into the complete article, possibly even with detailed instructions on how to do so, and the provision of a complete assembled product. In the Delta case it was always known and intended that the Contour kit would be assembled into a final form for use in an aircraft, albeit with the assembly being completed outside the UK. It does not take much imagination to envisage scenarios where the decision could give comfort to would be infringers that they may escape liability when they make and supply incomplete kits of parts for assembly outside the UK. This is regardless of the ease of availability and standard nature of the missing part or parts in question. A literal interpretation of the requirement that the invention be put into effect in the UK may result in increased use in the assembly of complete products in countries where no patent protection has been obtained, where the economies of scale make that worthwhile.

It may well be the case, in line with Justice Arnold's observations, that in scenarios where a complete kit is supplied ex UK there would be scope for some form of joint liability with the customers' infringing acts on a direct basis, but that would be dependent on taking action against commercially valuable end users and/or relying on foreign laws providing for liability in such circumstances.

That said it is always easy to identify potential chinks in the armour of a decision based on hypothetical scenarios, many of which may never or only rarely arise and which in reality would not have given rise to UK liability anyway before or after the decision. The Court seems to have been fully aware of the potential ramifications of its decision and it did consider both previous UK and foreign cases before reaching its decision. It was also aware that some countries such as Canada take the view that there is in reality no commercial difference between a completed product and a kit of parts as far as infringement is concerned. However, Justice Arnold did not agree that the previous UK (see Rotocrop International Limited v Genbourne Limited [1982] FSR 241 and Lacroix Duarib SA v Kwikform (UK) Limited analysed in detail at paragraphs 91 - 109 of Justice Arnolds decision in Delta) or even foreign cases were of assistance in firmly establishing that the issue of commercial equivalence was an appropriate basis upon which to construe the scope of direct infringement or establishing that there should be liability for an incomplete kit of parts. Essentially this was because one of the two UK cases and other foreign decisions were based on patent legislation derived or based upon legislation, prior to the Community Patent Convention which underlines the scope of infringement in terms of Section 60 of the UK. Therefore such decisions were of limited value as they may be misleading and in any event did not deal with the key extra UK territoriality issue at the heart of the Delta case.

Conclusion

At present the provision of an incomplete kit of parts, whatever that means, for assembly outside of the UK should not give rise to liability for direct or indirect infringement in the UK. The door has been left open to arguing that dealing in a complete kit of parts, even for assembly outside the UK, will give rise to infringement, although reading between the lines of Justice Arnold's decision his view appears to be that where assembly takes place outside of the UK it may be very difficult if not impossible to establish liability.

It is possible to see both sides of the argument. On the one hand the territorial limitation of patent protection has to be adhered to and parties are clearly free to apply for patent protection in the terms they chose and in key commercial territories or those in which assembly is likely to take place. However, on the other side of the coin, the question arises whether the decision exposes significant gaps in the internationally agreed rules for infringement creating a clearer line of defence when incomplete kits of parts are provided, particularly for assembly outside the UK.

In principle the finding is a very reasonable one, but the proof of the pudding will be in applying it to potentially complex factual matrixes designed to avoid liability in which two or more parties are clearly acting together, whether in the provision of the complete parts of the kit and/or subsequent assembly of the finished article. It is not difficult to see arguments arising as to whether a kit is complete or incomplete and whether the provided components can only realistically be used outside the UK for the purpose of putting the claimed product together. If applied strictly this decision would seem to provide that there would be no liability in such cases and it then could be a decision to be distinguished, overruled or potentially require a legislative change.

It will be interesting to observe the outcome of any appeal and whether its potential impact can be largely side-stepped by the provision of tighter patent drafting to meet the double territorial requirement. For those readers luckily enough in the current economic climate to be comfortably reclining on the aircraft seats in question on a long-haul flight with CIPA in hand, it may be the ideal environment to consider whether the decision has created a potentially damaging doctrine of kit of parts or is very much limited to the Virgin and Contour/Delta dispute.

This article was published in the CIPA Journal of January 2011.

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