Global Flood Defence Systems Ltd and another v Johann Van Den Noort Beheer B.V. and others  EWHC 99 (IPEC),  All ER (D) 17 (Feb)
The first defendant company, BV, developed a self-closing flood barrier in 2008.
The second defendant, N, was a director and shareholder of BV.
The second claimant, UKFB, had been trading in flood defence products. In later 2008, it entered discussions with BV about becoming the exclusive worldwide distributor of the self-closing flood barrier.
A licence was concluded in November 2010 between BV and the first claimant company, Global, who were acting as licensee.
K was the director and moving force behind the claimants.
The licence agreement stated that the self-closing flood barrier was registered under a European patent.
A dispute arose about the patent rights owned by BV and it terminated the licence agreement.
The claimants ceased sales of the self-closing flood barrier and began to sell an alternative product.
The defendants objected to the claimants’ continued activity in the market, claiming that the alternative product infringed their patent rights and threatened to bring action.
Although BV did not have a granted patent in the United Kingdom, it owned European Patent Application, which allows any claim in the UK for infringement of patent rights.
The claimants commenced proceedings, alleging that the defendants’ threats were groundless and actionable. The defendants counterclaimed for negligent misrepresentation.
The claimants submitted that the defendants had made unjustified threats of patent infringement proceedings and that three additional matters had to be taken into account. These were:
- The defendants had not prosecuted EPA 2315880 with sufficient diligence
- The claimants had launched the proceedings in May 2014 and were still waiting for a trial to resolve the question of alleged threats
- In breach of an injunction granted in January 2015, the defendants had made a further threat through a letter sent in Spain.
The defendants contended that neither side was in a position to argue the claim at the present stage, and it should be adjourned and heard at a later date.
The claimants submitted that the defendants had made negligent misrepresentations to them, which had induced them to enter into the licence agreement. That provided both a defence to the claim for outstanding royalties and set up a claim for damages due to the misrepresentation.
Three alleged misrepresentations were relied upon being:
- The self-closing flood barrier was protected by a valid European patent for a period of 20 years from 16 January 1996
- Shortly before 31 August 2010 a new patent had been granted for the self-closing flood barrier
- The barrier was protected by a US patent
The court ruled:
With respect to the threat of patent proceedings, it could not be the case that there were no circumstances in which a stay of threats proceedings in relation to a patent application should be granted even though the patent had not yet been granted. The circumstances in this case would qualify.
Once the notice of grant had been issued, the difficulties of speculation about what the final claims might be would fall away.
Regarding the further threat, the threat to bring proceedings in Spain was not a factor to be considered in the exercise of discretion on the question of adjournment.
The letter would not affect the court’s discretion to give the defendants the opportunity to defend the allegation of threats on the ground that the threats had been justified
A stay would be granted and the issue of threats would be adjourned.
Regarding the first alleged misrepresentation, K’s untutored view was not relevant.
The representations made by the licence agreement had been those that would have been perceived by a reasonable reader of the document with the background knowledge of K who, if not having the appropriate expertise himself, had taken informed advice.
If it had been expressed in the licence agreement that the self-closing flood barrier was covered by an EU patent, the operative part of the licence agreement had made it plain that Global would not have been induced to enter the licence agreement.
An informed reader of the document would have realised that recital A, which stated that the patent was protected in the EU, made no sense in the context of the operative terms of the licence.
Regarding the second alleged misrepresentation, on the evidence, there had not been a false representation made that shortly before 31 August 2010 a new patent had been granted for the self-closing flood barrier.
Regarding the third alleged misrepresentation, either there had been no representation in the licence agreement that there was a subsisting US patent, or alternatively the representation would not have influenced K to induce Global to enter the licence an agreement
The claim for misrepresentation failed