Schutz (UK) Ltd v Werit (UK) Ltd [2013] UKSC 16

Werit supplied replacement plastic bottles fitted by a reconditioner into used Schütz metal cages, the patented invention lying in the cage welds. The Supreme Court allowed Werit's appeal, holding that replacing the bottle was repair, not "making" the patented product under s 60(1)(a) Patents Act 1977.

Facts

Intermediate bulk containers (“IBCs”) are large containers, typically around 1,000 litres, used to transport liquids. They comprise a flat pallet, a metal cage (or “outer sleeve”) and a plastic inner container (or “bottle”) which fits snugly inside the cage. Bottles frequently cannot be reused because of toxic residues or physical damage; cages last, on the evidence, some five or six times longer than bottles.

European Patent (UK) 0 734 967 (“the Patent”), of which Protechna S.A. was proprietor and Schu00fctz (UK) Ltd the exclusive licensee, claimed a complete pallet container. The inventive concept, signalled by the words “characterised in that” in items [D], [E] and [F] of claim 1, lay in flexible weld joints in the cage u2013 dimples either side of the weld and a central raised part u2013 giving greater strength and durability. The description acknowledged that the inner container was “exchangeable”.

Werit (UK) Ltd sold bottles to Delta Containers Ltd, a reconditioner. Delta collected discarded Schu00fctz IBCs, removed the original Schu00fctz bottles, repaired the cages where necessary and fitted Werit bottles u2013 so-called “cross-bottling” u2013 then sold the reconditioned IBCs in competition with Schu00fctz. It was common ground that if Delta infringed, so did Werit (by way of indirect infringement under s 60(2) of the Patents Act 1977).

Floyd J held that Delta did not make the patented product, reasoning that what was left after removing the bottle u2013 the cage u2013 embodied the whole of the inventive concept. The Court of Appeal (Jacob LJ, Ward and Patten LJJ agreeing) reversed him, holding the case governed by United Wire Ltd v Screen Repair Services (Scotland) Ltd [2000] 4 All ER 353, [2001] RPC 24, and that the IBC ceased to exist when the bottle was removed. Separate Court of Appeal decisions on s 68 of the 1977 Act, arising from Schu00fctz’s failure promptly to register its exclusive licences, went in Schu00fctz’s favour on costs.

Issues

The principal issue was the meaning of “makes” in s 60(1)(a) of the 1977 Act: whether Delta “makes” the patented product when it removes a damaged Schu00fctz bottle from a Schu00fctz cage and replaces it with a Werit bottle.

Subsidiary issues under s 68 were: (i) whether reliance on s 68 had to be pleaded; (ii) whether Werit had in fact pleaded it sufficiently; (iii) how the costs sanction in the amended s 68 operates; and (iv) whether registration of the first licence sufficed after it was replaced by a second, unregistered, licence.

Arguments

Mr Thorley QC for Werit emphasised two features of the bottle: its significantly shorter life expectancy than the cage (so replacement was to be expected), and the fact that it contained no aspect of the inventive concept. Mr Meade QC for Schu00fctz contended that the appeal was determined by United Wire; he challenged Floyd J’s suggestion that the inventive concept had not resided in the retained part in that case, and argued that the inventive concept is often controversial and so an unsuitable touchstone for infringement by “making”.

Judgment

Lord Neuberger gave the only reasoned judgment; Lord Walker, Lady Hale, Lord Mance and Lord Kerr agreed. The appeal on infringement was allowed.

Interpreting “makes”

Lord Neuberger set out a series of contextual considerations. “Makes” is not a term of art and has no precise meaning; it will often be “a matter of fact and degree”; it must be interpreted practically but with a need for clarity and certainty, across products ranging from machinery to chemical compounds, and with an eye to protecting the patentee’s monopoly “while not stifling reasonable competition”. He stressed that:

First, the word “makes” must be given a meaning which, as a matter of ordinary language, it can reasonably bear.

He also noted, drawing on Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183 and Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2004] UKHL 46, that the precise scope of a claim may be “a matter almost of happenstance”, since it is drafted unilaterally by the patentee. Given s 130(7), the word had to be construed consistently with the European Patent Convention and Community Patent Convention scheme.

United Wire and German authority

The Court held that United Wire established that the question is simply whether the alleged infringer made the patented product, that this is a matter of judgment and fact and degree, and that asking whether work is “repair” can distract. But the speeches gave “not much guidance as to what specific considerations can or cannot be taken into account”. Lord Hoffmann’s conclusion there that the product “ceased to exist when the meshes were removed and the frame stripped down to the bare metal” was fact-specific.

Lord Neuberger examined four decisions of the German Bundesgerichtshof, including Flu00fcgelradzu00e4hler (Impeller Flow Meter) Case X ZR 48/03, Laufkranz (Wheel Tread) Case X ZR 45/05, Pipettensystem Case X ZR 38/06 and Palettenbehu00e4lter II, Schu00fctz v Mauser Case X ZR 97/11, which considered whether replacement parts are ones normally expected to be replaced during the product’s life, and the extent to which the technical effects of the invention are reflected in the replaced part. These deserved “considerable respect” though national courts are not obliged to follow each other. He agreed with the BGH that how a party markets its product (Delta’s “re-manufactured” label) is not determinative.

Repair and making

Replacement of a constituent part does not necessarily amount to making a new article; replacing roof tiles, or a car engine or body (Coleborn & Sons v Blond [1951] 1 KB 43), may be repair. Subject to not obscuring the statutory question, the repair/making contrast may sometimes be a useful cross-check, as Buckley LJ found in Solar Thomson Engineering Co Ltd v Barton [1977] RPC 537.

Errors below

Floyd J over-simplified in treating the test as whether what remains embodies the whole of the inventive concept. The Court of Appeal erred in the opposite direction by treating the case as governed by United Wire and failing to recognise the fact-and-degree nature of the question; Jacob LJ’s reasoning would have made replacement of any part (even a damaged bottle lid) an infringement, which could not be right.

The correct approach and result

Lord Neuberger held it “both legitimate and helpful to consider the question of whether the bottle is such a subsidiary part of the patented article that its replacement, when required, does not involve “making” a new article”. Relevant factors included the bottle’s shorter life expectancy and the buyer’s legitimate expectation of replacement (citing Betts v Willmott (1871) LR 6 Ch App 239), the fact that the bottle embodied no part of the inventive concept, that it was a free-standing item of property (unlike the integrated meshes in United Wire), and that Delta did no significant work beyond routine cage repairs. Whether end-users are paid for used IBCs could be relevant, but there was no evidence and the Court declined to remit, appeals normally being limited to points of law.

Weighing up the various relevant factors, I have come to the conclusion that by replacing the bottle in the IBC, Delta does not “make” the article identified in the Claim.

As a cross-check, Delta’s cross-bottling amounted to repairing the original product.

Section 68 (obiter)

Although academic, the Court addressed s 68. Contrary to the Court of Appeal, reliance on s 68 must be pleaded: “The main point of requiring a party to put forward its contentions in a statement of case or a pleading is to ensure that the other party is not taken by surprise”, supported by Fookes v Slaytor [1978] 1 WLR 1293 and Ketteman v Hansel Properties Ltd [1987] AC 189. But Werit had sufficiently pleaded it. On the costs sanction, both parties’ constructions were rejected in favour of a third, raised in argument by Lord Mance: costs are irrecoverable only so far as attributable to claims for damages or an account for infringements pre-dating registration, with apportionment involving “an element of rough justice”. The final point u2013 the effect of the unregistered second licence and the Court of Appeal’s reliance on Article 14 of the Enforcement Directive u2013 was left undecided, with a caution that the Court of Appeal’s reasoning “should not be regarded as necessarily correct”.

Implications

The decision clarifies that infringement by “making” under s 60(1)(a) is a multi-factorial question of fact and degree, not resolved by any single test. United Wire remains good law but is confined to its facts: it does not mean that removal of any component causes the patented product to cease to exist. Equally, Floyd J’s simpler “whole of the inventive concept” test was rejected as inconsistent with ss 60(1)(a) and 125(1).

Relevant factors identified include whether the replaced part is free-standing and easily replaceable, whether it embodies or is closely connected with the inventive concept, its relative life expectancy and substantiality, and whether additional manufacturing work is done. The judgment shows English courts drawing constructively, though not bindingly, on BGH jurisprudence in the interests of convergence under the EPC/CPC.

Practically, the decision matters to original equipment manufacturers, reconditioners and their component suppliers in aftermarkets: replacing a perishable, non-inventive component may be repair, permissible to a purchaser, whereas replacing the component embodying the inventive concept is far more likely to be “making”. The Court expressly acknowledged the case was “by no means clear”, so the outcome turns on its facts; the potential relevance of the value of used articles before and after reconditioning was recognised but unresolved on the evidence. The s 68 conclusions, though carefully reasoned, are obiter and the registration point remains open.

Verdict: Werit’s appeal on the main infringement issue was allowed: the Supreme Court held that Delta (and therefore Werit) did not “make” the patented product within s 60(1)(a) of the Patents Act 1977 by replacing a Schu00fctz bottle with a Werit bottle in a Schu00fctz cage, restoring Floyd J’s conclusion (for more nuanced reasons). The section 68 conclusions were accordingly obiter: Lord Neuberger would have allowed Werit’s appeal against the first section 68 judgment in part only (holding that section 68 must be pleaded, that Werit had pleaded it, and that costs are irrecoverable only in so far as attributable to claims for pre-registration infringements), and would have left open the appeal against the second section 68 judgment concerning the unregistered second licence.

Source: Schutz (UK) Ltd v Werit (UK) Ltd [2013] UKSC 16