Case Preview: Schütz (UK) Ltd v Werit UK Ltd
15 Tuesday Jan 2013
Inept DIYers such as the author of this article know the situation well: you start off by tinkering with a device, determined merely to “fix” it; you just chisel another bit off here, and smooth an edge there, and before you know it you’ve mutilated the original item beyond all recognition. But when exactly was it that the tinkering turned into transforming?
That, in essence, is the question before the Supreme Court this week in the main appeal in Schütz v Werit. Schütz, the original claimant, is an exclusive licence-holder in respect of a European Patent which discloses a container for carrying liquids. The patented container is called an Intermediate Bulk Container (“IBC”) and comprises three main parts: a plastic bottle; a pallet; and a metal cage in which the bottle sits.
Claim 1 of the patent indicates that the patented IBC comprises these three features, and some additional features of the cage that make the Schütz IBC a better IBC with respect to what went before.
Both parties to the appeal sell IBCs, typically to a supplier of some liquid (be it a chemical agent, a cosmetic product, or a drink). That liquid supplier then offers his liquid product to the market, in the IBC he has just bought. Within the IBC market, there are also so-called “reconditioners”. They engage in “re-bottling”, where an aged bottle is replaced within an existing pallet and cage, and in “cross-bottling”, whereby one manufacturer’s bottle is inserted into the cage of another manufacturer.
Werit, the Defendant (and this week’s appellant) sells its bottles to third parties, including a reconditioner called Delta. Delta buys used Schütz IBCs, and replaces the dead Schütz bottles with new, Werit, bottles; it then smartens up the resulting IBC and offers it to liquid product suppliers, in competition with Schütz themselves.
So are Delta and Werit “making” a second IBC product, within the patent, when they do this? Or are they simply tinkering with the already-extant patented IBC product which Schütz originally sold? If Delta are “makers”, they are infringers (within s. 60(1)(a) Patents Act 1977); mere tinkerers get away scot-free.
At first instance, the claim was heard by Floyd J, head of the Patents list in the High Court, who held that Delta/Werit were not “making” anything: what they had done was merely to adapt an object which at all times was the same IBC. In deciding this, Floyd J proposed a test for this repair/manufacture distinction (at his paragraph 197):
In my judgment the correct approach is to ask whether, when the part in question is removed, what is left embodies the whole of the inventive concept of the claim.
Accordingly, Floyd J applied his test, and determined that when the old bottle was removed from a Schütz IBC, what remained was still essentially a Schütz IBC. This was a claim that was really about a cage, so removing the bottle was neither here nor there.
The judgment was appealed, and the Court of Appeal reversed Floyd J’s finding of non-infringement. Jacob LJ gave the lead judgment (one of his last before retiring to a Chair at UCL). Jacob LJ analysed the speech of Lord Hoffmann in United Wire v Screen Repair Services  RPC 24, and held that Lord Hoffmann had endorsed and applied the test put forward by the Court of Appeal in United Wire, namely (per Aldous LJ):
It is therefore better to consider whether the acts of a defendant amount to manufacture of the product rather than whether they can be called repair, particularly as what could be said to be repair can depend upon the perception of the person answering the question. Even so, when deciding whether there has been manufacture of the product of the invention, it will be necessary to take into account the nature of the invention as claimed and what was done by the defendant.
The “making” test was said by Jacob LJ not just to have been approved, but was approved in such a way as to preclude any extensions to the test, such as Floyd J’s “whole inventive concept”. Jacob LJ held that the Schütz IBC ceased to exist once it was stripped of the Schütz bottle; when Delta/Werit then added a bottle to the remainder, it effectively made a second IBC, which satisfied all of the features of the claim. Delta were making an infringing IBC, and so Werit was liable for contributory infringement (Patents Act 1977, s 60(2)) by supplying the bottles.
There is a further appeal to be squeezed into the two days allocated for this case. The question there is, however, rather narrower: does the Patents Act 1977, s 68 prevent the courts from making any costs award in favour of a licensee who succeeds in a patent infringement action, but who did not registered his licence on time? That section of the Patents Act 1977 seeks to deprive an exclusive-licensee-claimant of his costs in such an action if his licence is unregistered. Plainly this is as an incentive to register licences.
The question remained, however: when a licence is registered late, does the costs penalty continue to have effect after that late registration, or does it only apply to costs incurred during the period of non-registration? The Court of Appeal chose the latter course, and construed the s 68 penalty as applying only during the period of non-registration. Since the majority of costs incurred in an infringement action would normally not arise until after a registration has been perfected, this view renders the penalty under s 68 of comparatively little significance.
It is to be hoped that the Supreme Court is able to provide decisive guidance on both questions (if only to avoid the otherwise-inevitable slew of articles saying they’ve “bottled it”).
Stuart Baran is a barrister at the specialist intellectual property Chambers Three New Square, where he completed pupillage in September 2012. Between 2008 and 2012 he was the Chairman of the Oxford International Intellectual Property Moot, an event with which he retains some involvement.