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    02:14 PM Elias Arun (LL.B. (Hons), National University of Singapore) and Joshua Kow (LL.B. (Hons), National University of Singapore)

    A Suspended State of Patent Invalidity: Sun Electric Pte Ltd v Sunseap Group Pte Ltd and others [2017] SGHC 232

        

    Introduction

    Can patent revocation proceedings be properly brought before the High Court at first instance, by way of a counterclaim in infringement proceedings before the court? This was the central question addressed by the learned George Wei J in the recent case of Sun Electric Pte Ltd v Sunseap Group Pte Ltd and others [2017] SGHC 232 (“Sun Electric”).

    Sun Electric Pte Ltd (the “Plaintiff”) is a Singapore company in the business of retailing solar energy to local consumers, and the registered proprietor of Singapore Patent Application No. 10201405341Y (the “Patent”) concerning power grids and a method of determining power consumption of connections on the grid. Sunseap Group Pte Ltd is the parent and holding company of Sunseap Energy Pte Ltd and Sunseap Leasing Pte Ltd respectively (together, the “Defendants”).

    On 18 November 2016, the Plaintiff brought an action against the Defendants, jointly and severally, for infringing eight out of twelve claims in the Patent (the “Asserted Claims”). In their Defence and Counterclaim (“D&CC”), the Defendants denied all allegations of infringement and counterclaimed for, inter alia, an order that the Patent be revoked. This was supported by their argument that all twelve claims in the Patent, including four which were not asserted by the Plaintiff (the “Unasserted Claims”), are and have always been invalid. In response, the Plaintiff took out an application under O. 18 r. 19(1)(a)-(d) of the Rules of Court to strike out parts of the D&CC, on the basis that it purported to put the Unasserted Claims in issue.

    On 4 May 2017, the learned Justin Yeo AR held that the Unasserted Claims could not be put in issue, whether:

    1.         by way of a defence against the Plaintiff’s infringement claim pursuant to s. 82(1)(a) of the Patents Act (“PA”); or

    2.         by way of a counterclaim for groundless threats of infringement proceedings under s. 82(1)(b) of the PA.

    However, Yeo AR further held (at [43]) that revocation proceedings could properly be commenced in the High Court at first instance. Such proceedings, he added, were particularly appropriate where infringement proceedings were already before the High Court, and revocation proceedings were brought by way of a counterclaim (judgment below by Yeo AR at [43]) such as in the present case. Therefore, notwithstanding his holding on the two issues above, the Defendants were effectively allowed to put any claims (both Asserted and Unasserted) in issue through their counterclaim for revocation. Unsatisfied with this outcome, the Plaintiff appealed to the High Court, arguing that the Defendants could not put any claims in issue by way of a counterclaim for revocation.

    High Court Decision

    In summary, the Plaintiff’s appeal was successful. In his judgment, Justice Wei made three important pronouncements on the issue of jurisdiction under the PA:

    1.     First, Justice Wei held (at [167]) that there was no express provision in the PA which conferred original jurisdiction upon the High Court to hear revocation proceedings by application, or to grant a prayer for revocation whether or not by way of counterclaim in infringement proceedings. Indeed, he agreed with the Plaintiff’s core argument that s. 80(1) PA only provides that the Registrar of Patents (“Registrar”) may revoke a patent, and is entirely silent as to whether the court may do so.

    2.    Second, Justice Wei held that s. 82(7) PA - a provision that seeks to prevent or control “duplicative” proceedings before the Registrar and in court - does not suggest that Parliament intended the court to have original jurisdiction over revocation proceedings (at [139]). This is because, when read in the light of the other provisions concerning invalidity as a defence to infringement proceedings, including the absence of any provision equivalent to ss. 72(6) and 72(7) of the UK Patents Act (“UKPA”), it is clear that Parliament did not intend for the court to have original jurisdiction to hear applications for revocation. This is a clear departure from the UK position.

    3.    Third, Justice Wei also concluded that, while s. 91(1) PA expressly provides the High Court with appellate jurisdiction over the Registrar’s decisions, this conferred the powers of the Registrar on the High Court for exercising appellate jurisdiction only, and did not go so far as to confer the jurisdiction of the Registrar to hear revocation proceedings in its original jurisdiction. Indeed, he observed (at [159]) that the “fact that the High Court has jurisdiction to hear a claim concerning infringement [...], in circumstances where the validity of the patent is raised as a defence, does not necessarily mean that the High Court has the jurisdiction or power to hear all proceedings, disputes and issues arising under the Patents Act including those which seek the revocation of the patent.”

    A Suspended State of Invalidity

    For clarity, the current state of the law following Justice Wei’s judgment may be summarised in a table, as shown in Table 1 attached.

    [Table 1]

    Notably, Justice Wei’s decision runs against the grain of thirteen precedent cases, common industry practice, and academic authority cited in Yeo AR’s decision. He states very clearly that the “fact that there are many decisions which appear to have accepted without adverse comment… is not a basis to establish jurisdiction as a matter of law” (at [120]). Notwithstanding this, Justice Wei’s reasoning is correct on the law as is currently stated in the PA. His decision is a welcome clarification not only for patent proprietors seeking to minimise legal risk of revocation in infringement proceedings, but also for defendants faced with allegations of infringement seeking to know their options at law.

    However, Justice Wei’s decision creates a number of practical concerns which we hope to address in this article. In our view, attention should be drawn to Justice Wei’s analysis on the fine difference between rights in personam and in rem (see [69]-[78]), as well as the powers of the Court vis-a-vis the Registrar (per s. 80(1) PA). In particular, while he acknowledged that the UK Supreme Court in Virgin Atlantic Airways v Zodiac Seats UK Ltd [2013] UKSC 46 characterised a decision on patent invalidity as both in personam and in rem (at [74], citing Lord Sumption and Lord Neuberger), he astutely observed (at [159]) that revocation orders were distinct from findings of invalidity in infringement actions. Indeed, even under the UK Patents Act, there does not appear to be a requirement that “a defendant must couple a defence based on invalidity with a claim for revocation” (at [77(b)]).

    Justice Wei reasoned (at [158]) that a claim for patent revocation is a determination of the status of a res, for the very purpose of removing it from the register and depriving the patentee of the rights in rem bestowed on him against the world. Accordingly, a decision in personam - which binds only the parties to the action - cannot be immediately taken to have an effect in rem. Sun Electric makes it clear that a successful defendant in Singapore would have to take the additional step of making a revocation application before the Registrar, as may be distinguished from practice in the UK.

    The practical impact of Justice Wei’s observations is significant: it recognises that there exists a suspended state of patent invalidity, situated immediately after the publication of a judgment and before the subsequent filing of an additional application for revocation with the Registrar. This is a situation whereby certain patent claims have been adjudged to be invalid, but the patent has not been revoked due to the jurisdictional split between the court and the Registrar. In this state of existence, the public merely has notice of the defects inherent in the patent through the judgment, notwithstanding the continued existence of the patent on the Register.

    On this understanding, we observe two practical issues which might arise in connection with this suspended state of invalidity:

    • First, and with respect, we put into question Justice Wei’s suggestion that the filing of an additional application for revocation not be deemed unnecessary or costly (at [128]). Bearing in mind that it is the defendant which bears the burden of taking the additional step, a successful defendant would have little to no incentive to do so as his case has been made out - the plaintiff can no longer establish infringement against him, and the objective of being able to continue business has been achieved. While rule 55(3)(k) of the Patent Rules requires a successful defendant to register court orders (e.g. a declaration of invalidity) in relation to a patent with the Registrar, registration simpliciter is not revocation. Unless the defendant is particularly vindictive or feels a general duty to the public good, it makes little commercial sense for him to apply for separate revocation proceedings at all regardless of cost. This is particularly so, as parties to litigation often seek to minimise their costs and to avoid prolonged legal tussles. More broadly, what is effectively a simple step in legal proceedings may be viewed by business owners as pointless or as involving needless legal fees.

     

    • Second, Justice Wei accepted (at [105]) that the “confusion or nuisance value” of such patents are “readily apparent, and perhaps especially so, considering that the Registrar only has a very limited power to revoke on his own initiative”. Indeed, until the patent is formally revoked, the patent proprietor remains empowered by s. 67 PA to institute proceedings against anyone else for alleged infringement of his patent. This suggests that an unscrupulous plaintiff could still continue to use his weak patent as grounds to issue cease-and-desist letters to unsuspecting or less informed parties, for example, cash-strapped startups, solo entrepreneurs, and small and medium enterprises (“SMEs”). Not all industry players have the benefit of prudent legal advice or an understanding of the in rem/in personam distinction, and may nevertheless succumb to the plaintiff’s demands in view of avoiding costly legal proceedings. This may have a chilling effect on technological innovation in Singapore.

    Conclusion and Recommendation

    While indisputably a correct decision on legal merits, Sun Electric leaves us with more questions than answers on Singapore patent law. In fact, Justice Wei himself recognised (at [197]) that “there is much to be said for consideration anew, at the appropriate time, of the court’s jurisdiction and the patent procedures in this regard by the relevant law reform body and by Parliament”.

    In light of the two practical issues raised in the commentary above, we submit that it would be in the interest of justice for Parliament to grant the High Court limited jurisdiction to revoke patents, where asserted claims are put in issue by way of a counterclaim for revocation in infringement proceedings only. With reference to Table 1 above, our proposed amendment would be to S/No 4, as shown in Table 2 attached.

    [Table 2]

    Such an amendment would not only eliminate the two practical issues above, but also be in line with the spirit of Singapore patent law. Indeed, allowing the High Court to directly revoke patents upon a successful counterclaim goes towards the same objective as Parliament’s decision to change to a positive grant system in 2012 - that is, to reduce the occurrence of weak patents on the Register. By removing the possibility of suspended invalidity altogether, both proprietors and users are given a greater degree of certainty by the court’s ability to directly order an amendment to the Register. However, this jurisdiction must nevertheless be limited to asserted claims only, as allowing revocation proceedings to put unasserted claims in issue will not only create a method of circumventing the limitations of S/Nos 1 and 2, but also expand the scope of the dispute beyond the original infringement action.

    The CEO of IPOS, Mr Daren Tang, commented recently that “IP is not about law; it is about business. IP can be technical and this scares away many business owners who see it as something best left to professionals.” Mr Tang’s quote deeply echoes the sentiment that intellectual property law and, in particular, patent law, has become far too complex and legalistic for the entrepreneurs who rely on it to succeed. While great strides have been made to create the vibrant innovation landscape that we see in Singapore today, Parliament should continue to finetune the Patents Act, not only for legal coherence, but for simplicity, in order to facilitate and encourage innovation. We hope that this article has identified a legal loophole that may be abused to the detriment of smaller players such as the SMEs and start-ups, which make up the backbone of the vibrant innovation landscape in Singapore.

    *This blog entry may be cited as Elias Arun and Joshua Kow, “A Suspended State of Patent Invalidity: Sun Electric Pte Ltd v Sunseap Group Pte Ltd and others [2017] SGHC 232” (14 October 2017) (http://www.singaporelawblog.sg/blog/article/197)

    ** A PDF version of this entry may be downloaded here

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