When Is An Import Not An Import For Patent Law?

By Brian Whitehead, Partner

The interim decision of Fancourt J in Rhodia Operations v Neo Chemicals & Oxides raises, but does not answer, some interesting questions around the scope of patent protection relating to imports. The background is that Neo was held, in 2018, to have infringed Rhodia’s patent, which was concerned with the use of cerium oxide as a catalyst for purifying vehicle exhaust gases. Rhodia elected for damages, seeking damages in respect of cerium oxide imported into the UK by Neo from China. The inquiry is due to be heard in January 2022. At the case management conference in the inquiry, Neo raised the following issues by way of a summary judgment application:

  1. Whether goods brought from China into and stored in a bonded warehouse in the UK, for subsequent export to a non-EU country, are imported and/or kept within the meaning of s.60 of the Patents Act 1977.
  2. Whether goods brought from China into and stored in the UK for the purpose of export and distribution overseas (principally to Germany) are imported and/or kept within the meaning of s.60 of the Patents Act 1977.
  3. Whether Neo is entitled in law to contend that, had it not imported and stored the goods in the UK for subsequent export, it would have imported and stored them in a non-UK port.

There was insufficient time at the CMC to determine the application, which was subsequently heard in a three day hearing.

The relevance of the three issues is as follows. On the first issue, the UK was an EU member when the acts of importation took place. Neo argued that the goods stored in a bonded warehouse remained at all times within the EU’s external transit customs procedure for non-Union goods, and therefore were never imported into the UK for the purposes of s.60. On the second issue, Neo contended that there is a disconnect between the wording of the Patents Act 1977 and the Community Patent Convention in relation to the scope of infringing acts. S.60(1)(a) of the Act specifies the infringing acts as “makes, disposes of, offers to dispose of, uses or imports the product or keeps it whether for disposal or otherwise”, whereas Article 29 of the Convention specifies the infringing acts as “making, offering, putting on the market or using a product which is the subject-matter of the patent, or importing or stocking the product for these purposes” (author’s underlining). Section 130(7) of the Act states “… it is hereby declared that the following provisions of this Act … section 60 … are so framed as to have, as nearly as practicable, the same effects in the United Kingdom as the corresponding provisions of the European Patent Convention, the Community Patent Convention and the Patent Co-operation Treaty have in the territories to which those Conventions apply”. Neo accordingly contended that s.60(1)(a) should be read as per Article 29, with the effect that the importation of goods solely for the purposes of subsequent export are not infringing acts.

The third issue relates to a long-standing policy in English patent law that it is not generally a defence, in a claim for damages for patent infringement, to contend that the activities complained of could have been carried out in a non-infringing manner, and that the infringing activities therefore did not cause damage to the patentee. Specifically, Rhodia is claiming that if it were not for the importation and keeping of cerium oxide products by Neo in the UK for export, it would have made those overseas sales, and is therefore claiming the profits it would have made on such sales. Neo’s contention is that any acts of importation and keeping were not causative of Rhodia losing overseas sales, as the importation and keeping could have been done in a non-UK port.

The judge declined to grant summary judgment on any of the issues raised, deciding instead that they would be better determined at the inquiry itself. These issues, of general importance in patent law, will therefore have to wait until 2022. In the meantime, the author regards the third issue as of particular interest and importance. The policy referred to above stems from an old (1888) decision of the House of Lords in United Horse Shoe and Nail Co Ltd v John Stewart & Co. In that case, the defendant had used a patented process to manufacture horse shoe nails, which it subsequently sold. The patentee sought damages on the basis that had the defendant not made those sales, the patentee would have made them. The defendant contended that it could have used an alternative (non-infringing) process to manufacture the nails, and that its use of the process therefore did not cause the patentee to lose sales. The House of Lords rejected the defendant’s argument, saying in terms that once infringement is admitted or found, the fact that the defendant could have achieved the same results in a lawful manner is irrelevant.

The United Horse Shoe principle remains good law in the UK, albeit with an exception for damages calculated on the “negotiating damages” basis. In such cases, i.e. where the patentee cannot establish lost sales, the court, in determining the arms-length royalty which would notionally have been agreed in a licence, will take into account an argument by the defendant that it could have gone elsewhere to source a licence. The author can see good policy reasons for upholding the United Horse Shoe principle in relation to acts of manufacture, but is less persuaded that the principle should apply to acts of importation. In the author’s view, a mere act of importation, without any subsequent offering or selling within the UK, is simply not causative of any loss on the patentee’s part. It remains to be seen, though, whether the Patents Court will agree.

This is for general information only and does not constitute legal advice. Should you require advice on this or any other topic then please contact hlk@hlk-ip.com or your usual Haseltine Lake Kempner advisor.