Introduction

Flitcraft Ltd & Ors v Price & Anor ([2024] EWCA Civ 136) is a pivotal case adjudicated by the England and Wales Court of Appeal (Civil Division) on February 27, 2024. The litigation centers around complex intellectual property (IP) disputes involving patents, copyrights, and allegations of passing off. The primary parties are Mr. Price and Supawall Limited ("Supawall") as claimants, and Flitcraft Limited, along with Garry Flitcroft and Thomas Flitcroft collectively referred to as "Flitcraft," as defendants.

The crux of the case lies in patent infringement claims related to two specific patents (GB 2415714 and GB 2436989), alongside allegations of copyright infringement and passing off. Complicating matters were issues surrounding the legitimate ownership of the patents, especially in light of Mr. Price's bankruptcy and subsequent claims by Supawall as an exclusive licensee.

Summary of the Judgment

The initial High Court judgment, delivered on December 20, 2022, dismissed most of Mr. Price's claims due to procedural shortcomings, notably the failure to join the true proprietor of the patents as mandated by Section 67(3) of the Patents Act 1977. Only Supawall's partial claim succeeded after amending the case to include the Official Receiver (OR) as a party.

Subsequently, in the costs judgment on April 3, 2023, the court apportioned costs between the different IP claims and between Mr. Price's and Supawall's respective patent infringement claims. Flitcraft appealed both the substantive and costs judgments, arguing against the joinder of the OR and the subsequent costs allocation.

The Court of Appeal dismissed Flitcraft's substantive appeal, upholding the decision to allow Supawall to join the OR and maintain its claim as an exclusive licensee. However, the costs appeal saw partial success, with the Appellate Court setting aside an interim payment order against Supawall.

Analysis

Precedents Cited

The judgment extensively references key precedents that shaped the court's reasoning:

• Summer v Fairclough [2012] UKSC 26: This Supreme Court case dealt with the penalty of costs against fraudulent claims, establishing that punitive cost orders should be rare and reserved for exceptional cases.
• Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137: Highlighted the general rule that defendants are entitled to costs up to the date of a late amendment if the amendment significantly alters the case.
• In re Pablo Star Limited [2017] EWCA Civ 1768 and Azam v University Hospital Birmingham NHS Foundation Trust [2020] EWHC 3384 (QB): These cases affirmed the appellate court's limited role in reviewing judicial discretion in joinder and procedural amendments.
• L'Oréal SA v RN Ventures Ltd [2018] EWHC 391 (Ch): Demonstrated equitable cost apportionment between proprietary and licensee claimants, often defaulting to a 50/50 split in overlapping claims.
• British & International Proprietaries Ltd v Selcol Products Ltd [1957] RPC 3: Pertained to the necessity of joining patent proprietors in infringement actions, emphasizing procedural compliance.

Legal Reasoning

The Court of Appeal meticulously dissected the High Court's legal reasoning, particularly focusing on the interpretation and application of Section 67 of the Patents Act 1977. Key points include:

• Section 67(3) Interpretation: Emphasized that while Section 67(3) mandates the joinder of the patent proprietor, its purpose is largely procedural to ensure comprehensive remedies and prevent multiple litigations against the defendant.
• Joinder of the Official Receiver: The court upheld the High Court's discretion to allow the OR's joinder post-judgment, especially to address solely liability-related issues without altering Supawall's substantive claims.
• Cost Apportionment: Recognized the complexity of overlapping claims and upheld a 60/40 split in costs between Mr. Price and Supawall, deviating from the standard 50/50 split due to substantial issues unique to Mr. Price's claims.
• Handling of Fraudulent Conduct: The court validated the High Court's decision to impose indemnity costs on Mr. Price for his fraudulent claim and penalize Supawall for Mr. Middleton's false evidence, reinforcing the judiciary's stance against deceptive litigative strategies.

Impact

This judgment reinforces the judiciary's commitment to procedural integrity in IP litigation, particularly in ensuring that exclusive licensees adhere to statutory requirements like joining the true patent proprietor. The decision clarifies:

• Judicial Discretion in Joinder: Courts possess the discretion to allow late joinders of parties like the OR, provided it serves the broader objectives of equitable remedy and judicial efficiency.
• Cost Allocation in Multi-Claim Litigation: Affirms that distinct but overlapping claims should have costs apportioned based on their individual merits and complexities, rather than being treated as a single consolidated claim.
• Deterrence of Litigative Fraud: Sends a stern message against fraudulent claims and perjury in litigation, highlighting the serious repercussions such conduct can entail in terms of cost liabilities.
• Interpretation of Licence Agreements: Clarifies that contractual clauses within license agreements should not undermine statutory protections granted under the Patents Act, ensuring that exclusive licensees retain their rights to enforce patent infringements.

Complex Concepts Simplified

Section 67 of the Patents Act 1977

Section 67 governs the rights of exclusive licensees to enforce patent rights. It stipulates that an exclusive licensee has the same rights as the patent proprietor to initiate infringement proceedings. Importantly, when such proceedings are initiated, the true proprietary (original patent holder) must be included as a party in the litigation. This ensures that any remedies or damages are apportioned fairly between the licensee and the actual proprietor.

Joinder of Parties

Joinder refers to the process of adding additional parties to an ongoing lawsuit. In patent infringement cases, it's essential to include all parties with a proprietary interest in the patent to ensure comprehensive and effective legal proceedings. The requirement under Section 67(3) ensures that exclusivity is respected and that defendants are not subjected to multiple lawsuits from different proprietors.

Cost Apportionment

When multiple claims or parties are involved in litigation, the court must determine how legal costs are allocated among them. Cost apportionment can be based on the complexity, size, and outcome of each claim. In cases where claims overlap, costs for common issues may be split between the parties based on the extent to which each party’s claim relied on those issues.

Indemnity Basis Costs

Indemnity costs are awarded in situations where one party has acted improperly, such as through deception or fraud. Unlike standard costs, which are a standard rate, indemnity costs are calculated based on the actual financial harm or expenditure the opposing party incurred due to the wrongful actions.

Exclusive Licensee's Standing

An exclusive licensee is a party that has been granted exclusive rights to use or exploit a patent. Under Section 67(1), such licensees have the standing to sue for patent infringements similarly to a patent proprietor. This standing is crucial for enforcing IP rights without necessitating the original proprietor's direct involvement.

Conclusion

The Flitcraft Ltd & Ors v Price & Anor judgment underscores the judiciary's meticulous approach to safeguarding intellectual property rights while ensuring procedural compliance and fairness in litigation. By upholding the joinder of the Official Receiver and refining the principles surrounding cost apportionment, the court has fortified the framework within which exclusive licensees can enforce patent rights effectively.

Moreover, the stringent handling of fraudulent conduct by Mr. Price and Mr. Middleton serves as a deterrent against deceptive litigative practices, reinforcing the integrity of the legal system. The comprehensive analysis of precedents and the nuanced application of legal principles in this case provide invaluable guidance for future IP litigations, particularly in scenarios involving complex ownership and licensing structures.

Ultimately, the judgment balances the need for robust IP protection with equitable judicial processes, ensuring that all parties' rights are respected and that the pursuit of justice remains uncompromised.