SINGAPORE COURT OF APPEAL ADDRESSES ISSUES IN PATENT INFRINGEMENT CLAIM RELATING TO BUSINESS METHOD

1. First Currency Choice Pte Ltd v Main-Line Corporate Holdings Limited and Another Appeal [2007] SGCA 50

Executive Summary

In this recent case, the Singapore Court of Appeal (the “Court”) applied well established propositions of patent law to a patent infringement claim relating to a business method. The Court also commented on the application of the plea of innocent infringement provided by section 69(1) of the Patents Act (Cap. 221).

Background

Main-Line Corporate Holdings Limited (the “Respondent”) owned a patent that covered a system of determining the operating currency of a payment card at the point of sale between the merchant and the cardholder by automatically extracting the "identifier code" from the payment card number and comparing the identifier code with the Bank Reference Table so as to ascertain the relevant currency (the “Patent”). The Patent was granted in Singapore on 30 June 2003, with its priority date being 12 July 1999. The Respondent also holds a similar patent in Europe, which was granted by the European Patent Office on 5 December 2001

Claim 1 of the patent is an independent claim for a method of automatically determining a preferred currency in a card transaction. It claims:

“a data processing method for determining a preferred currency for association with a charge, debit or credit card transaction between a merchant and a charge, debit or credit cardholder comprising the steps of;

obtaining the card number of the card from the cardholder, characterized in that the method further comprises the steps of;

identifying an identifier code from the said card number,

determining the operating currency for said identifier code, by comparing said identifier code with entries in a table, wherein each entry in the table contains an issuer code or range of issuer codes and a corresponding currency code, and setting the currency for association with the card transaction as the determined operating currency for the issuer code”.

The essential elements or integers of claim 1 of the patent are therefore:
(a) identifying an identifier code from the said card number;
(b) determining the operating currency for the said identifier code;
(c) by comparing the said identifier code with entries in a table (the Bank Reference Table), wherein each entry in the table contains an issuer code or range of issuer codes and a corresponding currency code; and
(d) once the card currency is identified, the transaction can then be set to that currency as its operating currency.

Between July 1999 and June 2000, United Overseas Bank Limited (“UOB”) entered into negotiations with the Respondent for a licence to use the invention in the Patent (the “Invention”). A non-disclosure agreement was signed between the parties, and the Respondent disclosed considerable confidential technical and proprietary information about the patented system as well as demonstrated how the system worked. However, these negotiations came to naught. On 11 October 2001, UOB entered into an agreement with First Currency Choice Pte Ltd (“FCC”), under which the latter would offer the then newly-available First Currency Choice System for use at various merchant outlets linked with UOB.

On 10 May 2002, the Respondent informed UOB through an e-mail that the European Patent Office had granted the former the Patent on 5 December 2001 and that corresponding applications were pending in over 60 countries, including Singapore.

The Respondent subsequently claimed that UOB and FCC (collectively known as the “Appellants”) had infringed the Patent by offering for use in Singapore since December 2001 the First Currency Choice System, a card currency recognition system said to perform the same function as the Respondent's invention.

Issues Raised in the High Court

The Appellants contended that the Patent failed on the ground of lack of novelty and submitted various alleged prior users and prior art.

They also argued that the Patent was invalid as it did not involve an inventive step and the patent specification did not sufficiently disclose the Invention for it to be performed by a skilled person and was therefore invalid.

Decision of the High Court

The High Court held that the Appellants' evidence was insufficient to qualify them as prior users of the invention or to establish existence of prior art. Accordingly, the High Court held that the invention was novel.

On the issue of inventiveness, the High Court held that at the material time, no other party had introduced an automatic system to implement the process of deciphering a payment card’s operating currency.

On the issue of sufficiency of product specification, the High Court held that the terms “identifier code”, “issuer code” and “identified issuer code” were elaborated on in the Patent. Further, a notional skilled person “would have no difficulty performing the Invention after having studied the specifications in the Patent.”

The High Court found that the Patent was valid and that the Appellants infringed the Patent. The High Court held that it was immaterial that the First Currency Choice System performed automatic currency identification in a slightly different sequence from that in the Patent or had some additional feature which was not in the Patent, so long as the First Currency Choice System did perform the same function using the integers of the claims in the Patent and the variation or addition did not alter the essence.

The High Court found in favour of the Respondent and granted an injunction against further infringement of the Respondent’s Patent.

Plea of Innocent Infringement

The High Court held that the defence of innocent infringement ought to be positively pleaded rather than merely implied by virtue as an infringer who believed that a patent could be challenged was certainly not the same as one who did not know about the patent.

To succeed in the defence provided by section 69 of the Patents Act, an infringer would have to plead and prove absence of knowledge and absence of reasonable grounds. The High Court held since UOB had the requisite knowledge of the Patent or at least reasonable grounds for supposing that it existed by virtue of an e-mail sent by the Respondent on 10 May 2002, any innocent infringement ended by that date.

The High Court held that in an appropriate situation, a grace period could be granted for an innocent infringing party to bring its infringing activities to a stop after it became aware of a relevant patent. However, the present case did not warrant such equitable intervention because, on the facts, UOB never had the intention to stop the infringing activities after it was notified. UOB took no steps whatsoever to stop using the First Currency Choice System after it was imbued with the requisite knowledge and therefore did not merit being given a grace period.

The High Court found that UOB’s liability for damages commenced from 10 May 2002 onwards.

Issues Raised in the Court of Appeal

The Appellants brought an appeal against the decision of the High Court. The three main grounds of the appeal were whether the Patent involved an inventive step, whether the patent specification sufficiently disclosed the Invention, and whether the appellants had infringed the Patent.

Decision of the Court of Appeal

The Court applied the well settled principles of patent law to the facts in the case. The Court upheld the High Court judge's decision on these three issues and dismissed the appeal.

Plea of Innocent Infringement

While the Appellants did not challenge the High Court’s finding on the plea of innocent infringement, the Court felt it would be appropriate to address some concerns which have arisen.

The Court held that it is trite law that it is actual and constructive knowledge of the existence of a patent that is material. Whilst the Court acknowledged that there has been “some disinclination on the part of the courts to award damages for acts of infringement committed during a period of ‘innocence’ … the statutory test for determining whether an infringer was aware or should have had reasonable grounds for supposing that the patent in dispute existed is an objective one.”

The English courts look at whether the infringing party made “the necessary investigation which a prudent man of business in the same circumstances would have made”. This was also the approach adopted by the Singapore Court of Appeal.

The Court held that “the publication of a patent application is significant because it can serve as a form of notice to the infringer, thereby modifying the protection afforded by the plea of innocent infringement”. However, as UOB is not in the line of software business, and there was no evidence adduced at trial as to whether UOB should reasonably have known that the Singapore patent application was pending, the Court held that it would be unreasonable to hold that the mere publication of the Singapore patent application should be deemed to have put UOB on notice of potential patent infringement.

On the facts, UOB was only informed of the European Patent and the pending Singapore patent application on 10 May 2002. Therefore, UOB could only rely on the defence of innocent infringement until 10 May 2002, the date when it first received notice from the Respondent.

Comments

This decision is notable on two fronts. Firstly, it is the first reported Court of Appeal decision on whether claims for a business method will be upheld. The Court of Appeal affirmed the decision below, namely that such claims will be upheld in Singapore. This sets Singapore patent law apart from many other jurisdictions in the world, notably the UK and EPO.

The second notable decision is that where innocent infringement is concerned, knowledge of the patent is not automatically imputed to the infringer merely by publication by IPOS or WIPO (in the case of PCT applications). Whether such knowledge can be imputed depends on the facts of the case. A relevant factor is whether the infringer is in the same industry as the patentee (in the present case, the software industry). Actual notice by way of an email for example, would constitute sufficient notice to defeat a defence of innocent infringement.

2. Dextra Asia Co Ltd and Another v Mariwu Industrial Co (S) Pte Ltd [2007] SGHC 51

Court: High Court
Coram: Tan Lee Meng J
Suit No: Suit 641/2004
Decision Date: 12 Apr 2007

In Dextra Asia Co Ltd and Anor v Mariwu Industrial Co (S) Pte Ltd [2006] 2 SLR 154 an action was brought by the owners of a Singapore patent (“the patent”) and its exclusive licensees in Singapore (collectively referred to as “Dextra”) for an injunction against and damages from the defendant (“Mariwu”) in respect of alleged patent infringement.

The patent concerned a process for making, via cold forging, mechanical joints used to connect reinforcement bars (“rebars”) in the construction industry (“the Bartec process”). Before the patent was registered in Singapore, a patent for the Bartec process had been registered overseas under the name of a French company (“Techniport”). Prior to the date of its application for the latter patent (“the relevant date”), Techniport had discussed the commercial exploitation of the Bartec process with a company (“CCL”) and had granted CCL an exclusive licence for the Bartec process for, inter alia, Singapore. As at 1995, CCL was marketing the Bartec process and products made thereby (“Bartec products”) in Singapore. In 1998, Dextra acquired the patent. Dextra subsequently brought the present action against Mariwu, CCL’s distributor of Bartec products in Singapore at the material time.

Mariwu contended that the Bartec process was not patentable on two grounds. First, it was not new or novel because prior to the relevant date, it: (a) was already in use in Hong Kong and France; (b) had been publicly disclosed via discussions involving Techniport, Dextra and CCL on the commercial exploitation of the invention; and (c) already formed part of the state of the art relating to the joining of rebars. Second, it did not involve “an inventive step” as required under s 13(1)(b) of the Patents Act (Cap 221, 2005 Rev Ed) since it simply entailed putting an old system (ie, cold forging) to a new use and comprised elements already known in the field of mechanical joints for rebars. The issue before the court was whether the patent was invalid due to a lack of inventiveness or novelty.

At first instance the High Court allowed the claim and held that the plaintiffs, Dextra Asia Co Ltd and Dextra Manufacturing Co Ltd (collectively referred to as “Dextra”), the owners of rights in Asia to “Bartec”, a patented invention used in reinforcing concrete in the construction of buildings, were entitled to damages from the defendant, Mariwu Industrial Co (S) Pte Ltd (“Mariwu”), for infringement of the said patent.

Mariwu appealed and contended that the patent was not novel because there had been prior use of the patent in France and Hong Kong before its priority date. However, Dextra denied that there had been any use of the Bartec invention in France before the priority date and while the Bartec invention had been used in Hong Kong, the use was confidential and did not affect the novelty of the patent. Before the appeal was heard, Mariwu successfully applied to the Court of Appeal for the admission of further evidence, which concerned events in 1994. The Court remitted the case to the trial judge to hear the further evidence.

In 1994, Dextra had not yet acquired the rights in Asia to the Bartec patent and it was then a licensee of the patent, paying royalties at the rate of 5% to Establissements A Mure (“Mure”). Mure had acquired the ownership of the Bartec patent from its original owner, Techniport SA. In 1994 Dextra collaborated with its fellow licensee, CCL Systems Limited (“CCL”), whose former officers gave evidence in support of Mariwu, for the purpose of pressurizing Mure not to sell the Bartec patent to Erico, a common competitor of theirs, and to reduce the royalties payable by them for the Bartec patent from 5% to a lower figure.

In a decision given on 12 Apr 2007, the High Court saw no reason for altering the conclusion in the first judgment that it was not established that the Bartec patent is invalid because of prior use, either in France or in Hong Kong.

In considering the case, the High Court considered the following further evidence:-

1. Dr J M Pithon, Dextra’s main witness at the trial, had questioned the validity of the Bartec patent in 1994 and had asserted that the patent had been commercialised in France and Hong Kong before the priority date. As he had asserted at the trial that he knew of no facts which would invalidate the patent, the new evidence put the state of his knowledge in issue.

2. Another key argument of Mariwu with respect to the further evidence was that it revealed that Mure had admitted at the Lyon meeting, at which CCL was represented by Mr Copping, that the Bartec patent was invalid.

3, Mariwu asserted that an adverse inference should be drawn from the fact that Dextra did not call Mr Alain Bernard, the inventor of the process that was patented. Mariwu asserted that Mr Bernard had told CCL’s officers that the Bartec patent was invalid and that he was unable to attest to this because he was working for Mure.

The Court held that whatever its suspicions it held, a court can only make a decision on its validity on the basis of the evidence available before it. Although the further evidence was initially unfavourable to Dextra, it was clear after it was evaluated that it did not tilt the balance in favour of Mariwu’s case

In relation to item (1) the assertion of Dr Pithon, the Court formed the view that it was an assertion made with a view to getting a better deal from Mure. Whether or not what he had said was the truth or a bluff is for the trial judge to determine after hearing the evidence on this issue.

As regards argument number (2), at the hearing, this assertion was not borne out and was in fact not corroborated by Mr Copping.

As for item (3), the Court held that Dextra were not obliged to call Mr Bernard as a witness. The assertion that Mr Bernard had told CCL’s officers that the Bartec patent was invalid and that he was unable to attest to this because he was working for Mure was pure hearsay. The Court cited Soon Peck Wah v Woon Che Chye, [1998] 1 SLR 234 as an authority.

This decision is notable in that assertions made by a patentee that its patent is invalid, albeit made while it was not yet an owner of the patent, did not serve to invalidate the patent.

If you would like more information about this legislation or wish to discuss how it may potentially affect you or your business, please feel free to contact the corporate lawyers in Drew & Napier LLC (please refer to the Directors’ Profiles on our website), or either of the following lawyers:

Morris John
Managing Director (Intellectual Property)
T: +65 6531 2503
E: mj@drewnapier.com

Gerald Koh
Director (Intellectual Property)
T: +65 6531 2559
E: Gerald.Koh@drewnapier.com

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