Kerr v Laurence Shaw & Associates Ltd (t/a Laurence Shaw & Associates (In Liquidation)) [2010] EWHC 585 (Ch)

Case No HC08 C02343[2010] EWHC 585 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 19/03/2010
Before
MRS JUSTICE PROUDMAN
Between
ANDREW ROBERT ENGLAND KERRClaimantLAURENCE SHAW & ASSOCIATES LIMITEDDefendantTrading as LAURENCE SHAW & ASSOCIATESDefendant
Robert Deacon (instructed by Shakespeare Putsman LLP) for claimantMark Chacksfield (instructed by Reynolds Porter Chamberlain LLP) for defendantHearing Hearing dates: 8-11 December 2009
Judgment
[1]This is an action in contract and tort against the defendant company of patent agents, which is in voluntary solvent liquidation. It is alleged that the defendant was negligent in failing to take steps to obtain a Canadian patent for the claimant’s invention of a type of combined body armour and life jacket.[2]The dispute before me is one as to liability only since the claim asks for an inquiry as to damages. However, although it is common ground that I have to decide whether there was actionable negligence, the parties by their counsel have been unable to agree what else I have to decide. This issue is likely to turn on the parties’ respective submissions on the decision of the Court of Appeal in Andrew Master Hones Ltd v. Cruikshank & Fairweather [1981] RPC 389, which I will deal with later in this judgment.

Retainer, breach and causation

[3]In about 1998 the claimant Mr Kerr, who is a qualified solicitor, devised an inflatable protective buoyancy garment, comprising penetration resistant body armour and a gas inflatable bladder arranged to inflate on immersion in water. Mr Kerr has produced a number of safety products over the years, and he explained in evidence that his interest was aroused as a result of rescuing a fisherman who was in difficulties. That gave him the idea of producing a protective garment that was both weapon-proof and buoyant in water.[4]On 11 January 1999 Mr Kerr received a SMART business award, which put him in funds to make a patent application for this product. In February 1999, he retained the defendant to assist him in obtaining patent protection. He dealt principally with Mr Laurence Shaw. Mr Shaw has since died and Mr Edward Dowler, another patent agent at the defendant with some more limited involvement, is terminally ill and unfit to give evidence. A third patent agent, Mr Rupert Symons, who was also at the defendant firm and dealt with Mr Kerr from 2003, gave evidence for Mr Kerr, but none of his evidence directly addressed the primary facts about what happened before that date.[5]Mr Kerr adduced evidence, without much in the way of detail, that there had been other negligence claims against the defendant for missed deadlines. There was some cross-examination of the defendant’s witnesses about this but it did not take the matter much further. No authorities on the admissibility of similar fact evidence were cited to me and it seems to me that I should concentrate on what happened in this case rather than what did or may have happened in other cases.[6]The defendant filed a UK patent application on 2 March 1999, and on 12 April 1999 filed a Patent Cooperation Treaty (“PCT”) application at the UK Patent Office, claiming priority from 27 February 1999 for the international phase. Thereafter there was fragmentation into the national phases, with applications being filed in each selected state. The fees for each application were typically between one and two thousand pounds, but cumulatively they added up to a large total. National applications involved the use of local patent agents, so fees could escalate.[7]The time limits for filing the relevant applications were in some cases 30 months from the priority date, that is to say, 27 August 2001 and in others 31 months from the priority date, that is to say, 27 September 2001. In the case of the USA and Canada, the applicant could delay his application subject to paying a penalty for late filing. The deadline for filing was 27 August 2001, but, provided he paid a penalty, the applicant could delay until 27 August 2002.[8]There were several telephone conversations and face to face meetings between Mr Kerr and Mr Shaw. Mr Kerr’s evidence was that he had little or no recollection of any of these and as Mr Shaw is dead I do not have his version of events. Much therefore turns on contemporaneous documentary evidence and the inferences to be drawn from all the circumstances of the case. I propose to mention some of the most important correspondence between the parties.[9]On 11th June 1999 Mr Shaw sent Mr Kerr a schedule of countries for consideration, and told him to select countries in which he had a commercial interest. On 3rd July 1999 Mr Kerr responded, saying he was having funding problems and asking whether he could defer the applications until November. Mr Shaw accordingly sent letters to the overseas patent agents to obtain costing information. On 11th July 2001, Mr Shaw wrote to Mr Kerr stating that some applications were due by 27 August 2001 and others by 27 September 2001 and telling him that the defendant was not prepared to carry him financially until November. The letter went on to say:
“for some countries, it is possible to overrun the deadline and then go ahead with the application on a delayed basis, but that incurs penalties. If you were to choose the EPO and the USA as two countries where you would wish to delay, the extra penalty is likely to exceed £1,000. If you have confidence in the product you might be better off in raising the money now to get the protection instead of incurring those penalty fees.”
[10]A preliminary list of countries was sent the following day. On 1st August 2001 Mr Shaw sent Mr Kerr a table of 39 countries, showing which required action by 27 August and which by 27 September. Canada and the USA were asterisked with the note “can be delayed”, but no time limit for the delay was given. Mr Kerr produced a copy of that table which he had ticked on receipt. The countries he ticked were not only Europe, Japan, the USA and Canada but also Australia, Hong Kong, India, Israel, South Korea, New Zealand, Russia, Singapore and South Africa.[11]The fees required would have been nearly £24,000. It is common ground that in the event Mr Kerr did not give instructions to the defendant to proceed with any of those other countries with the exception (in the circumstances I shall mention) of Israel.[12]On 8th August 2001 Mr Kerr wrote to Mr Shaw, instructing him to proceed with the applications in Europe and Japan, saying that he wanted to delay in relation to the USA and Canada and noting that most of the other countries in which he was interested were subject to the September deadline. I do not accept what Mr Kerr said at one point to the effect that he had thought that ‘delay’ was some kind of intermediate positive step. Not only did Mr Shaw clearly explain what he meant by a delayed application in his letter of 11th July, but it transpired in the circumstances I shall mention relating to the USA application that Mr Kerr was well aware that there was no such thing as a holding application. The only reasonable inference in the circumstances is that for financial reasons Mr Kerr wanted to delay making a decision about the USA and Canada for as long as possible. Indeed, Mr Kerr wrote to Mr Shaw on 13th August 2001, telling him to let Mr Kerr know in advance before any costs were incurred.[13]On 23rd August 2001 Mr Shaw’s diary entry reads, “any other nat phases? Client to advise today!” An attendance note records a meeting between Mr Kerr and Mr Shaw in which Mr Kerr’s funding problems were discussed and there is express mention of the European and Japanese national phase applications. Mr Kerr agreed in oral evidence that it was fair to say that the whole range of potential national phases would also have been discussed.[14]After this meeting no USA or Canadian files were opened or applications launched, nor was any diary reminder made. However at the end of his attendance note of the meeting Mr Shaw asked his assistant to raise the matter of national phases with him again in a month’s time.[15]On 28 August 2001 Mr Shaw wrote to Robic, the patent agents in Quebec, in order to stop costs running in relation to Canada. He asked them to close their file for the time being. The terms of this letter showed both that Mr Kerr told Mr Shaw that he did not want to proceed in Canada within the initial timetable for funding reasons but also that Mr Shaw thought that there was a possibility that Mr Kerr might make a late application. In other words, Mr Kerr was apparently keeping his options open at that stage.[16]On 20th September 2001 Mr Shaw wrote to Mr Kerr, presumably as a result of the one month reminder, reminding Mr Kerr of the 27 September deadline for “any further patent applications” and requesting him to clarify whether he was in a position to give any further instructions. As none was received, Mr Shaw entered “NFR”, meaning No Further Reminders, in his diary. Mr Chacksfield describes this as an important call, indicating a positive understanding that no further patent applications were to be made. However it seems to me that the letter is neutral as it can be read as relating only to those countries which had the September 2001 deadline.[17]An important telephone conversation took place on Friday September 28 2001. There is a dispute as to who placed the call, and Mr Chacksfield invites me to infer that Mr Kerr placed the call because he was evidently in a panic thinking he had missed the deadline for a USA application. The question of who placed the call is a minor matter, although it does seem that Mr Kerr raised the question of a late US application. Mr Kerr gave evidence that he could not remember anything about the content of the conversation. The evidence of a letter from Mr Shaw to Mr Kerr on 4th October 2001, which was not contradicted on receipt, is therefore crucial. It says:
“I refer to our telephone conversation late on Friday September 28, 2001, when you said that you wanted to have a patent application for this invention in the USA. It is necessary for you to sign certain documents for the US patent application…Please sign them and return them to me. We gave you an idea of the cost of filing the patent application in different countries including the USA. I will check with my associate whether we will get away without a penalty fee and an invoice will follow in a day or so.”
[18]Mr Kerr says that the reference to the “idea of the cost” in relation to other countries must have related to the list produced some two months earlier. The defendant says it has to have been something discussed in the telephone call. I do not think it is possible to answer that question from the terms of the letter. However I agree with Mr Chacksfield that it cannot be coincidence that the US application was raised the day after expiry of the September deadline. Mr Kerr may have thought that the permitted period of delay was only one month. At all events I infer that Mr Kerr knew that the period of delay was not indefinite and that he needed to give positive instructions to Mr Shaw about the US application. The same therefore follows in relation to the Canadian application. Thereafter, Mr Shaw opened a US file and US reminders put in his diary, but there was no Canadian file and there were no Canadian reminders.[19]There is strong evidence that between January 2000 (when Mr Kerr’s SMART award determined) and at least January 2003 Mr Kerr was in financially straitened circumstances. There are constant references to his shortage of funds in the correspondence, he was in debt to the defendant and Mr Shaw made it clear in August 2001 that the defendant was not prepared to carry him any longer and would require pre-payment of fees. Mr Kerr accepted in cross-examination that Mr Shaw had told him that the time had come to make some hard decisions about which patent applications to pursue and which to drop.[20]From an early stage the defendant pleaded that Mr Kerr would not have been able to afford to proceed with the Canadian patent application in the penalty period between 27 August 2001 and 27 August 2002. Mr Kerr was asked on at least four occasions during the course of this litigation for disclosure of his financial circumstances in this period. Initially his position was that the material would be provided, but he subsequently objected to disclosure on the ground of privilege. The fact remains that he has failed to provide any evidence to support his contention that he could have proceeded with the Canadian patent application on or before 27 August 2002. I find that it is more likely than not, in all the circumstances, that Mr Kerr told Mr Shaw at some time in the penalty period, and that it was indeed the case, that Mr Kerr was not in a position to make any further applications in the national phase.[21]There is consistent evidence over a long period showing that Mr Kerr knew and was unconcerned about the fact that no Canadian application had been made. He was sent reminder lists of his patent portfolio on many occasions between 2002 and 2007, in none of which was it suggested that a Canadian application was pending in any way, but Mr Kerr did not himself raise the issue. On April 2nd 2002 Mr Shaw sent Mr Kerr a letter about insurance in relation to his patents and Mr Kerr accepted that he knew he had a duty of strict disclosure of all applications to his insurance company. Europe, Japan, the US and Israel are mentioned but Canada is not.[22]On April 11th 2003 Mr Dowler wrote to Mr Kerr with a schedule of his patent applications. When it was put to Mr Kerr that he must have read this and thereby understood that no Canadian application had been made Mr Kerr replied that he had only “glanced” at the schedule. As the schedule was produced in response to a specific request from Mr Kerr I find this evidence unconvincing.[23]On 26 February 2004 Mr Kerr had a meeting with Mr Symons who again produced filing sheets and schedules of current applications which he said were produced specifically to ensure that Mr Kerr was clear as to the content of his portfolio. After some other reports and a budget, Mr Kerr wrote to Mr Shaw on 25th June 2004 in response to a letter about the Israeli application, saying that as far as he was aware “we were not late in filing Applications in any other countries”. This supports the defendant’s case that Canada was excluded as a matter of conscious decision on Mr Kerr’s part rather than merely because of forgetfulness or breach of duty on the part of the defendant.[24]Mr Kerr acknowledged that he had never experienced a delay of even as much as 18 months in filing a patent in the national phase. That drove him to say, at one point in his cross-examination, that he had thought that a firm application had been filed in Canada. However he admitted that he was aware that he had not paid and had never been asked to pay any fees in relation to Canada. He also acknowledged that he had not given positive instructions for Canada, although he had done so for the USA. He then said that until 2007 he had assumed that the Canadian application was somehow, as he described it, ‘in hand’, apparently as some sort of interim holding application. At various points he also said that he believed that he could still make a delayed application. I find these responses inherently contradictory and ultimately unconvincing.[25]Mr Kerr told the court that since 2003 he has discussed his patent portfolio with Mr Symons about once a month. I observe that while Mr Symons probably knows what Mr Kerr’s thought processes were when the present dispute arose in 2007 (because of the questions that Mr Kerr must have put to him about obtaining a Canadian patent) he said nothing about this aspect of the matter in his evidence.[26]I obtained the distinct impression during the course of his cross-examination that Mr Kerr’s instinctive reaction was to try and shore up flaws in his case. This is consistent with his conduct of his patent application for this product in the Israeli national phase. Having visited an air show in France in November 2001 Mr Kerr changed his mind about his initial decision not to apply for an Israeli patent. An affidavit was drafted by Mr Shaw (and I do not ignore his active participation in the affair) in support of an application out of time. It has been proved to my satisfaction both(a) that the reasons given in the affidavit for why the application was late did not hold water and(b) that the true facts did not support the strict requirements imposed by the Israeli Patent office for making an application out of time.[27]Although Mr Kerr is a solicitor he reviewed, confirmed and swore this affidavit with the required statement of truth. Mr Kerr was cross-examined in some detail about his conduct in relation to this affidavit. While he did not accept that he had lied, he was forced to acknowledge that the affidavit “was not correct in some parts”. Thus, at best, Mr Kerr was reckless as to swearing an affidavit which was untrue in several respects in order to obtain patent protection for his garment in Israel.[28]It seems to me, despite his denials, that it was only with hindsight, after Mr Kerr became aware of a potentially competing product in Canada (“the Mustang”), that he raised the question of a Canadian patent, presumably with Mr Symons, and called for the file. I find this was similar to his change of mind about making an application in Israel and was similarly prompted by events subsequent to the 27th August 2002 deadline. Although he had little memory of what had been said in his conversations with Mr Shaw he focused on the letter of 8th August 2001 and convinced himself that a continuing retainer had been created.[29]The burden of proving negligence is on the claimant. The applicable test is common ground. The appropriate standard against which the defendant’s conduct is to be measured is that of what the reasonably competent patent agent would do having regard to the standards normally adopted in his profession: see e. g. Martin Boston & Co v. Roberts [1996] PNLR 45 per Simon Brown LJ at 49-52. A charge of professional negligence is a serious one, and the court should be particularly careful in finding such a charge proved where, as here, the claimant cannot remember what was said in crucial conversations and the other party to the conversations, the principal protagonist on the defendant’s side, is dead.[30]The issue is one of fact whether the defendant failed to take the steps required in accordance with that test to secure Mr Kerr’s position in Canada. What Mr Deacon says is this. There was evidence, from the defendant’s witnesses as well as from Mr Symons, as to the standard procedure adopted by the defendant for reminders and file opening. Although for this purpose I ignore Mr Symons’ evidence about what he would have done in Mr Shaw’s shoes as largely inadmissible, it seems to me that evidence about the file and reminder system is both relevant and admissible.[31]Mr Deacon submitted that the failure to open a Canadian file in accordance with standard procedure was the sole cause of the problem which arose. Once the national phases had opened and the PCT file was closed no further reminders would be entered in relation to the PCT. The only reminders would be those entered in relation to files opened in the national applications. Thus unless a file was opened for each country there would inevitably be no diary entries and no system operating to prompt any reminders.[32]Mr Deacon submitted that Mr Kerr’s letter of 8th August 2001 constituted an unequivocal instruction to make but delay the Canadian application. On the evidence that puts the case too high. It seems to me that there was no positive instruction to proceed; Mr Kerr’s case must therefore be rather that it was negligent to leave his instructions to delay hanging in the air until the time limit for a delayed application had expired.[33]Mr Deacon submitted that the defendant was negligent at the first stage of the process in not opening a file for Canada. He said that it is a red herring to say that an instruction must have been given to countermand the retainer to make a late application to Canada. For the reasons I have given I would rephrase that as an instruction to abandon re-consideration of a Canadian application. There is no note on file that any such instructions were countermanded. Further, there is no evidence at all to indicate that Mr Kerr was ever told what the ultimate deadline was for a Canadian application. Mr Deacon submits that the fact that no file was opened, and thus that there were no reminders, cannot logically support an inference that the instruction was countermanded. There is no paper trail capable of closing the whole matter of Canada.[34]The client relies on a patent agent to take all formal steps to obtain patent protection (and ensure it is not lost) in countries in which he expresses a continuing interest. The duty lies with the agent to remind the client of deadlines, not with the client to remember them and raise them himself.[35]The defendant had a retainer to take the steps to which I have just referred. The issue for me however is whether Mr Kerr has proved that he expressed an interest in Canada which continued beyond the initial deadline of 27th August 2001 to the expiry of the extended deadline a year later.[36]I bear in mind that Mr Kerr cannot remember much of his oral conversations with Mr Shaw and that Mr Shaw is not here to speak for himself. However I also bear in mind the letter to Robic containing the statement that a delayed application might still be made after the initial deadline. On balance I find that the letter of 8 August 2001 required Mr Shaw to have opened a file for Canada or to make diary entries to ensure that the extended deadline was not missed. In the alternative, Mr Kerr should have been told in explicit terms that he had one year only to delay the Canadian application and it should have been spelt out to him that no further steps would be taken without a positive instruction.[37]However Mr Kerr has to prove that, if these steps had been taken, he would have proceeded with the Canadian application. Mr Deacon submitted that the cost of the filing would have been trivial and that, indeed, Mr Kerr’s application in Canada in 2002 for a patent for a different product supports his case that he would have made a Canadian application for this product. Mr Kerr says that he expected at all times to proceed in the USA and Canada “because of interest I had received and anticipated receiving from the armed forces and Coast Guards in those countries.”[38]It seems to me, looking at the contemporaneous evidence, that this is merely wishful thinking. I have no doubt that by the end of 2001, Mr Kerr’s instructions were correctly interpreted by Mr Shaw to mean that Mr Kerr did not wish to proceed with any more applications. He had funding difficulties from at least the middle of 2001 until at least 2003 and he consciously decided to limit the scope of his patent applications to Europe, Japan, the USA and Israel, excluding all the other countries on his original tick list. In other words, I have no doubt that, if a Canadian file had been opened it would have been properly closed by the end of 2001. Again, if Mr Kerr had been reminded about Canada before the final deadline had expired, he still would not have applied for the Canadian patent. It was only with hindsight, after he became aware of the Mustang, that the potential benefits of a Canadian patent were advanced over those of obtaining a patent in other countries on his tick list.[39]Accordingly, while I find that on the balance of probabilities Mr Shaw should at the outset have either opened a Canadian file or written in explicit terms to Mr Kerr about the extended deadline for Canada, failure to do so was not the cause of any damage. Mr Kerr has not satisfied the court that, had that procedure been followed, he would have applied in the Canadian national phase in any event. Indeed I find that, after his letter of 8th August 2001 but before the expiry of the deadline on 27th August 2002, he was in fact aware that there was an impending deadline and he made a conscious choice on financial grounds not to proceed with the Canadian application.[40]In those circumstances the question of whether substantial or only nominal damage was caused by the defendant’s negligence does not arise. However I have heard some considerable evidence on that issue and, in case I am wrong on the issue of causation, I ought to go on to consider that further question.

Nominal or substantial damages

[41]It is common ground that if there was actionable negligence I also have to decide whether more than nominal damage was suffered. Mr Deacon submits that I do not have to consider the question whether a valid patent, surviving challenge, could have been obtained at the end of the day, as that is a matter to be left over to the inquiry. Mr Chacksfield on the other hand points out that the pleadings show a significant dispute on the question of what type of damage was caused, which I am required to resolve, and that there has been significant expert evidence on the issue of a whether a patent could have been obtained and if so on what terms. Mr Deacon's response is that the claimant’s Reply was merely a response to the defendant’s pleading and should not be taken as an assertion of the claimant's own case.[42]I accept that it is not necessary for the claimant to prove the extent of the damage he has suffered as this is the subject of the inquiry. However both sides adduced expert evidence from Canadian patent lawyers at trial in the context of pleadings raising issues as to whether a Canadian patent would have been granted and, if so, in what form. Indeed the claimant produced three reports from his expert, Mr Zahl, (who is both a lawyer and a patent agent in Canada) setting out his expert views on construction, infringement, amendment, obviousness, inutility and so on according to Canadian law. The defendant prepared for trial to meet the case that the damage issue would stand or fall on the validity of amended claims drafted by Mr Zahl (“the Zahl claims”) on which Mr Kerr relies in his pleadings.[43]The claimant's case changed when Mr Deacon took the matter over from his predecessor counsel. Mr Kerr now asserts that the issues dealt with by the experts are matters which go to quantum and do not fall to be decided at this stage. Mr Deacon submitted that Mr Bird and Mr Zahl are not persons skilled in body armour, they cannot therefore put themselves in the position of a person skilled in the art and their evidence as to many of the issues about which they have in fact opined is useless. Mr Chacksfield argued that while the evidence of a skilled person would have been the counsel of perfection, it is too late for the claimant to criticise the state of the evidence at the trial stage on this basis. Mr Zahl was instructed by Mr Kerr who is in fact skilled in these fields, even though (unlike the notional person skilled in the art) he is an inventor. In this context I note that both experts acknowledged that their expertise was in Canadian patent law, not in the art of armoured vests or inflatable life preservers or any combination of both, but that they had nevertheless endeavoured to place themselves as far as possible in the position of a skilled person and offer their views accordingly.[44]Jackson & Powell on Professional Liability (6th Ed paragraph 21-020) says as follows:
“…the claimant will recover substantial damages if there was a significant chance (for instance) that it might have obtained a valuable patent. This may involve considering whether the patent would have been granted, whether revocation proceedings might have been brought and what the results of those proceedings might have been, and whether a competitor could easily have avoided infringing such claims.”
[45]The method of assessing loss caused by a negligent patent agent was considered in the Andrew Master Hones case. The Court of Appeal held that as it was a negligence action and not an infringement action, the logical method for assessing damages was to evaluate the market price of the right to pursue the application, on the assumption that (as was conceded in that case on appeal) it would have been accepted without amendment by the Patent Office. In making the evaluation, the court would take into account the prior art, the likelihood of opposition or revocation proceedings and the possibility of competitors modifying their product to avoid infringement.[46]Andrew Master Hones presented a particular problem because the judge at first instance, Graham J, was asked not to assess damages but to make a finding whether damages would be substantial or nominal only and, if substantial, whether they were large or small. As Buckley LJ pointed out (at 396) that question gave rise to two further questions, namely(a) would the claimant have obtained the grant of a valid patent? And(b) if so, would such patent nevertheless have been valueless or of small value because a potentially infringing competitor could have modified his apparatus so as to be clear of the claims of the patent?[47]On appeal, not only was negligence conceded but it was also conceded that the Patent Office would have accepted the patent application, without any concession as to whether the application would have proceeded to a grant having the claims of the complete specification or, if not, in some amended form.[48]As Buckley LJ said, it was open to the Court of Appeal, as it had been to Graham J, to leave all questions affecting the quantum of damages to the tribunal conducting the inquiry, together with further evidence bearing on those two additional questions. That is what Mr Deacon suggested was the proper course in this case. He submitted that the expert evidence was relevant (if at all) only to the issue whether there was a significant chance that if an application had been made to the Canadian Patent Office that application would initially have been accepted.[49]However, that course would entail ignoring the very substantial expert evidence adduced without objection, and presumably at great expense, by both parties in the present case. It seems to me that to jettison that evidence now, only to have it re-investigated on an inquiry, would be a disproportionate, costly and unwarranted approach. I cannot in all conscience ignore it altogether.[50]In Andrew Master Hones too the Court of Appeal felt constrained to make findings as to damages short of actual quantification. It is important to see the basis on which the Court held that damages should be assessed. Buckley LJ said at 403, “In assessing damages it must be borne in mind that this is not an infringement action. What the plaintiff company suffered in consequence of the defendants’ negligence or breach of contract was the loss of whatever benefits might have accrued to the company if the application had been accepted by the patent office, as it is conceded it would have been if it had been put in order by 7 July 1967. As I have already pointed out, it does not follow from that concession either that the plaintiff company would certainly have obtained a grant of a patent, or that, if the company had obtained the grant of a patent, that patent could have successfully withstood revocation proceedings. Nor can we be sure what the claims of such a patent would have been, nor whether a competitor could easily have avoided infringing such claims. One method-and it seems to me to be the logical method-of arriving at an assessment of damages might be to attempt to quantify the price at which the plaintiff company could have disposed in the open market as between willing vendor and willing purchaser of its right to pursue its application on the assumption that it had been accepted by the Patent Office without amendment, for it was of this right that the company was deprived by the defendants' negligence or breach of contract. Such a quantification cannot be an easy matter, for it necessarily involves forming a view of what the opinion of the supposed purchaser would be upon the various unknown factors which I have indicated, as well as of the value which the supposed purchaser would put upon the potential profitability of any patent he might succeed in obtaining.” Templeman LJ said (at 405), “I agree also with my Lord that the appropriate method of assessing damages is to attempt to quantify the price at which the plaintiff company could have disposed in the open market as between willing vendor and willing purchaser of its right to pursue its application on the assumption that the application would have been accepted by the Patent Office without amendment. In my judgment it must however be assumed that the purchaser would have been prudent enough to make prior inquiries which would have revealed the Hotchkiss patent and that the purchaser would have bought the benefit of the application by the plaintiff company in the knowledge, or at least suspicion, that any patent granted in respect of Mr Andrew's machine would be vulnerable to opposition proceedings or revocation proceedings and in any event could be avoided with ease by the use of fixed spacers.” Brightman LJ agreed with both judgments.[51]In the event, the Court of Appeal considered the additional questions as best it could on the evidence it had and held, taking into account the prior art, the likelihood of opposition or revocation proceedings, and the possibility of competitors avoiding infringement, that the damages would be neither nominal nor large. Buckley LJ said, at 405, “In my judgment damages are not nominal, because the purchaser might well have been willing to pay something for a patent, which though vulnerable to attack and avoidance, nevertheless might prove some deterrent to competitors and some convenience to the patent owner. However, the patent would have been so vulnerable to attack on the grounds of invalidity and could have been so easily avoided that it is improbable that a purchaser would have been prepared to pay a large amount.”[52]Mr Chacksfield submits that Andrew Master Hones is not authority for the proposition that nominal damage necessarily results where an opportunity to make a patent application is lost and, as a result, the claimant is deprived of his opportunity to acquire patent protection. I do not think that is quite right but I accept his submission with the substitution of the word ‘substantial’ for ‘nominal’.[53]It is an ingredient of the causes of action before me that the claimant must prove damage and I would not order an inquiry unless there is a reasonable case that some substantial damage resulted from the negligence. It therefore seems to me that on the case as it was presented to me I ought to decide that issue, without having to go on to the further stage of deciding whether the damages would be small or large.[54]No authorities (other than Andrew Master Hones) were cited to me on the issue of how far I have to go in my findings or what is the criterion for ordering an inquiry. In ignorance of any such authority it seems to me that the proper course is to consider whether the claimant has a real prospect of obtaining damages in a substantial, as opposed to merely nominal, amount. If so (always assuming I am wrong on the causation question) an inquiry should follow.[55]To do this I have to decide whether, as the defendant alleges, Mr Kerr’s case that his patent protection was a marketable asset must fail with the result that the prospect of significant damages is too slight to justify any inquiry. If there is a real prospect of value in the putative patent as a marketable asset it must I think follow that (again assuming I am wrong in my findings about causation) there is also a real prospect of substantial (although not necessarily large) rather than nominal damages. I say a real prospect because it might be that the tribunal conducting the inquiry would decide not to award any damages at all.[56]Mr Kerr’s case on damage originally centred on the allegation that his patent application could have been deployed to show potential infringement by the Mustang. That case was not pursued before me. Mr Chacksfield submitted that the only value in a patent is its value against a background of known competitors; the result of dropping all arguments on liability about the Mustang is that there is no evidence of any loss with the result that Mr Kerr’s case must inevitably fail.[57]I do not think that necessarily follows. This is not an infringement case, nor is the court being asked to assess damages on the basis that there would, but for the defendant’s negligence, have been a claim for damages for infringement. The measure of damage is the value to the inventor of his opportunity to sell a patent for his product. I am not told whether it was intended to deploy evidence about the Mustang on any inquiry as to damages so that what is said about not relying on the Mustang applies only to the issue of liability. In the absence of evidence about any known competitor damages might well not be large. After all, in the absence of a competitor, it is always open to the inventor to market his product without a patent. However that does not mean that a purchaser might not be willing to pay something for the patent, for example as a deterrent to potential future competitors.

Would the Canadian Patent office have accepted the claim?

[58]The first issue is whether the Canadian Patent Office would initially have accepted Mr Kerr’s application without modification. That is not a question I can answer with certainty as, in distinction from Andrew Master Hones, there has been no concession that it would have done so. Mr Deacon submits that this is a loss of opportunity case; there was a real and substantial, rather than a merely speculative chance that the application would have been accepted, if only on the basis that the other Patent Offices did accept the applications without having found the prior art.[59]However, I cannot ignore the fact that it is common ground in this case (and admitted in Mr Kerr’s pleadings) that the set of claims that would have gone to the Patent Office in Canada are identical to those of the granted European patents and that those claims are unsustainable over prior art comprised in a Japanese patent of 10 August 1987. There is an admission that the claims are invalid. Without more I cannot see that any substantial damage can be said to have been suffered through the loss of opportunity to sell an admittedly invalid patent. As the actual facts are common ground this is not a case of loss of a chance: compare Allied Maples Group v. Simmons & Simmons [1995] 1 WLR 1602 with Hibbert Pownall & Newton v. Whitehead [2008] EWCA Civ 285.[60]If I am wrong and it is a loss of a chance case so that it is relevant that the prior art might not have been found by the Canadian Patent Office, I note the evidence from Mr Hobson that three pieces of relevant prior art, including the Japanese patent, were found on a single standard search. This supports Mr Zahl’s opinion that the prior art would have been uncovered in any subsequent litigation even if not at the initial stage. Thus the question of the validity or otherwise of the Zahl claims is relevant to damage in any event.

Would the Zahl claims have been pursued?

[61]It follows from what I have already decided on causation that in my judgment Mr Kerr would not have pursued a Canadian patent at all and thus could not have pursued the Zahl claims. However I am now proceeding on the assumption that those findings were wrong.[62]Mr Kerr alleges that had the prior art been raised (whether during the course of prosecution of the grant, or, after the grant, for the purposes of re-examination or re-issue) he would have pursued the Canadian patent and amended his claims by incorporating limitations into the existing claim. He relies on the Zahl claims produced by his expert as a fair reflection of the amended claims that he would in fact have advanced.[63]A preliminary issue under this head is whether Mr Kerr would in fact have amended his claims to conform to the Zahl claims. Mr Zahl accepted in oral evidence that his amendments were drafted not only as claims to get round the prior art but also to catch possible infringements and in particular the Mustang. When it was put to him that the amendments were drafted with a significant eye to the Mustang, Mr Zahl replied “I had the Mustang product before me, absolutely.” Later it was put to him that his amendments, particularly as to the purpose of the armour and the lack of any protective element of the armour, were driven almost solely by the desire to incorporate the Mustang. He replied, “…my answer is really a ‘Yes’ and ‘No’. I was attempting to make as broad a claim- for the independent claim…I was trying to make that as broad as I possibly could, and the Mustang product was a very nice example of something that looked very different, and if I could cover that, that would meet my goal.” In brief, and reading his evidence together with the Experts’ Joint Statement of 1st December 2009, Mr Zahl’s position is that he amended his claims with the Mustang in mind, although he did not do so solely in order to capture the Mustang.[64]The duty of a patent agent when faced with prior art is to amend the claims to make them as broad as legitimately possible. I entirely accept Mr Zahl’s frank ‘yes and no’ answer. However what Mr Zahl properly did on instructions is a different matter from the causation issue that the Court has to decide.[65]I have considerable doubt whether Mr Kerr has shown that he would in fact have amended in the form of the Zahl claims. There is nothing before me to suggest that the patent prosecution would still have been pending in 2007 when Mr Kerr first learned of the Mustang. The Zahl claims were advanced as representative of that which would have been devised to get round the prior art, not to deal with the Mustang in the event that it had been found during the Patent Office process. The claimant has hinted at an argument that even if the Zahl claims would not have been made (or would have been bad) further as yet unspecified ones might be advanced. However the claimant has pleaded and advanced the Zahl claims as the sets on which he relies.[66]I am unable to determine on the facts before me whether some sort of other valid amendment could have been devised to get round the prior art. Should I find that such claims might have been advanced, so that Mr Kerr was deprived of the opportunity of amendment to produce a valid claim? Again, I have not been taken to authority as to the scope of what I should decide. In the absence of such authority it seems to me that I cannot consider the question in a vacuum of whether valid amendments might have been made. Mr Kerr relies on the Zahl claims in his pleading and he cannot rely on a claim set that would not in fact have been advanced.[67]On balance it seems to me that Mr Kerr would not have advanced claims in that form. Mr Zahl’s instructions would have been different because Mr Kerr would have been unaware of the Mustang. In those circumstances no case for substantial damage has been made out.[68]I turn to the question whether, if, contrary to my findings, the Zahl claims would have been pursued, there is a reasonable prospect that they would have resulted in a valid patent. The defendant asserts that the claims would plainly have been invalid.[69]First the defendant alleges that the Zahl claims exceed the scope of the protection and are not supported by the invention disclosed by the specification in the PCT. It is common ground that as a matter of Canadian patent law amended claims must be supported by the disclosure, that is to say, they cannot cover subject matter which exceeds the scope of the invention as described by the inventor. The Experts’ Joint Statement annexes an extract from Hughes and Woodley on (Canadian) Patent Law which they agree correctly summarises, in general terms, the applicable principles of Canadian law. It contains the following passage:
“…the claim must not be broader than the invention disclosed. If the claims include the essence of the invention, they cannot be broader than the invention. Overclaiming must be in relation to an essential element of the invention. If the claim fails to include an element essential to the invention disclosed, it is invalid.”
[70]That last sentence contains a reference to a case in a footnote which is unfortunately not included in the annex. However, it seems to be common ground between the experts that a claim is invalid if, (after proper construction of the original and the amended claims), it fails to include an element essential to the invention disclosed. The first step is thus to construe the invention in the PCT and the European patent. The second is to construe the Zahl claims.[71]It is common ground between the parties and their experts that under Canadian law a patent is to be construed through the eyes of a notional person skilled in the art of design of the relevant type of product. Interpretation is to be undertaken having regard to the common general knowledge of the skilled person. The patent is to be construed objectively (without regard to the subjective intentions of the patentee), purposively, and not in an over-technical manner. In doing so the skilled person will identify essential and inessential elements of the claim. The former are vital to establishing validity, whereas the presence or absence of the latter will neither necessarily save a patent on the issue of validity, nor bar a finding of infringement.[72]The invention as described in the PCT is “a garment comprising body armour” such as “might be worn by a member of the armed forces, police and so on”. The document continues with a brief description of prior art:
“A known protective garment comprises of flexible body armour with a facility for increasing protection by way of a ceramic plate”
. The PCT then describes “one object” (in fact the only object mentioned) and the main aspect of the invention in the following terms:
“It is one object of the invention to provide an improved body protection. According to the invention in one aspect there is provided a protective body garment containing; i) armour resistant to ballistic and/or stab attacks; ii) a gas inflatable bag arranged to inflate on immersion in water to provide buoyancy to the wearer; the bag being shielded by the armour in the garment, and the garment including means for avoiding harm to the wearer by pressure on the body when the bag is inflated.”
[73]Mr Bird’s evidence is that a core feature of the invention is armour protecting the torso. The garment has an inflatable buoyancy bladder within it which is also protected by the armour. The invention also includes means for avoiding harm to the wearer through pressure on inflation. Thus the armour protects the wearer from the weapon but also prevents the wearer from drowning through piercing of the bladder. The arrangement of the garment avoids damage to the wearer through the armour being pressed into the body when the garment inflates. His view is that any argument that improved body protection can be construed as limited to protection from drowning is unlikely to be successful because the initial description shows that in the first instance the weapon damage contemplated is damage to the body rather than to the bladder.[74]By contrast, Mr Zahl’s claim 1 reads as follows:
“A body garment comprising; A vest having an internal surface and an external surface defining a space therebetween; An inflatable floatation bladder in the form of a bag located within said space; A pocket located within said space between said bag and said external surface, at least partially overlying said floatation bladder; and A layer of penetration-resistant armour within said pocket at least partially overlaying said floatation bladder to provide protection against weapon damage to said bladder.”
[75]The defendant’s case is that the product no longer protects the wearer’s torso from weapon injury. It is no longer a garment (in the sense intended by the disclosure) and the armoured element is there only to protect damage to the bladder.[76]This shift of emphasis is relied on by the defendant to show that the Zahl claims are impermissible as not having sufficient support in the original disclosure. The Zahl claims are capable of comprising the Mustang which covers only a small area of the torso and has only a small square of armour inside it. Mr Bird’s opinion is that this cannot reasonably fall within the PCT disclosure, which requires armour providing a substantial level of protection to the wearer’s body. A product that can simply be a yoke is not a garment and a very small armouring element does not include the essential element of the invention disclosed by the PCT, namely protection to the wearer from weapons. A small area of armour protecting the bladder does not necessarily function inherently so as also to protect the wearer.[77]Mr Bird’s opinion is also that it is impermissible in fulfilling the promise of the PCT to rely on an element of the claim that is expressly stated to perform a different function. A related matter is the question of inutility. If Mr Bird is right and protection of the body is an essential element of the disclosure, claims in respect of a garment that does not provide any protection to the body against weapons fail for inutility also.[78]It is a matter of construction (by a notional person skilled in the art and according to Canadian law) of the words “body armour” and “protective garment” as those terms are used in the PCT and in the context of the PCT as a whole. Mr Zahl’s opinion is that as no particular coverage of armour is specified in the PCT his claims are supported by the original invention.[79]I see the force of Mr Bird’s opinion. However, I cannot go so far as to say that the claimant’s chances of obtaining a valid patent were so negligible that he would not have had an asset of any value in the market with the result that an inquiry could not be justified.[80]I heard a considerable amount of evidence on the question whether all the relevant elements of the claims were clearly and unambiguously disclosed in the Japanese and French patents. As far as the Japanese patent is concerned the principal issue on anticipation was whether the specification disclosed that the armour is in a pocket. Mr Zahl says it is not; Mr Bird says that it is. There were similar narrow issues in relation to the French patent. It seems to me impossible to say that the prospect of showing that Mr Zahl was right would be too small to justify an inquiry. The same is true when considering the issue of obviousness.[81]In those circumstances I do not propose to say any more about these questions on the issue of liability, particularly as some at least of the lower Zahl claims would arguably remain unaffected even if obviousness were found in relation to the claims 1 to 5 of the Zahl claims.

Conclusions

[82]In my judgment there are no grounds for ordering an inquiry. Although I find on the balance of probabilities that Mr Shaw was negligent in failing to trigger a system of reminders in relation to Canada or alternatively to notify Mr Kerr of the Canadian deadline and tell him that the defendant would take no further action in the absence of a specific instruction, I have found that no damage was caused thereby. Mr Kerr would not have applied for a Canadian patent by 27 August 2002 in any event. Even if I am wrong about that, I find that he would not have been able to market a patent which he admits was invalid. He would not have amended in the form of the Zahl claims. If, contrary to these findings I had decided all these matters in his favour, I would however have gone on to order an inquiry for the reasons I have given.[83]Accordingly I dismiss the claim.