Challenging patent validity post-settlement
Is a party to a settlement agreement in respect of a patent, precluded from later challenging the validity of that patent? This question was addressed in Stretchline Intellectual Properties Ltd v H&M Hennes & Mauritz UK Ltd by the English Court of Appeal. Although the case does not concern subject matter in the life sciences area, its findings are in principle applicable to any patent.
The patent at issue, owned by Stretchline, concerns an invention for making the fabric tubes which are used to encase the under-wires used in garments such as brassieres and swimming costumes. These prevent the wires penetrating the tubes and causing discomfort to the wearer. The patented fabric tubes prevent this problem by creating a barrier from weaving into the fabric a fusible yarn, which melts in the fabric drying process, bonds to the fibres in the fabric and solidifies when cooled.
Background
Stretchline began proceedings against H&M for infringement of the patent, based on brasseries being sold by H&M. H&M counterclaimed for the revocation of the patent. The proceedings led to a mediation between the parties, in May 2011, which concluded in an agreement. In particular, the parties agreed full and final settlement of their respective claims and not to pursue any further proceedings relating to or arising from those claims.
Later, in mid-2012, Stretchline again became suspicious that H&M were selling garments in infringement of their patent and began fresh proceedings against them. Again, H&M asserted the invalidity of the patent and sought its revocation. This time the parties were unable to resolve their differences.
Stretchline sought to have H&M's claims of patent invalidity struck out by Mr Justice Sales, on the basis that H&M were precluded from raising these issues under the settlement agreement. The judge agreed and struck out those parts of H&M's defence and counterclaim that asserted invalidity of the patent.
The appeal decision
On appeal, the Court of Appeal examined the terms of the settlement agreement in order to properly construe them. It noted that the recitals of the agreement stated that the parties intended to bring to an end the whole dispute between them. They were also cast in broad enough terms to encompass a challenge to the validity of the patent. The terms also included a full and final settlement of all possible claims relating to the subject matter of the proceedings. This, the court held, is wide enough to encompass the allegation of invalidity in both the defence and counterclaim.
Furthermore, the agreement not to sue was also drawn up in broad terms – H&M had agreed not to pursue any proceedings "relating to or arising from" the settled claims. Finally, the parties had also agreed to the stay of the original proceedings, indicating that they were disposing of the proceedings, including the defence and counterclaim, on the terms agreed. The court held that it was an inescapable conclusion from the settlement agreement that H&M had relinquished the right to bring a claim of invalidity of the patent by either defence or counterclaim.
However, although the court had not been asked to consider the question, it also expressed the view that Stretchline was also not entitled to pursue its second infringement action and that the only course of action available to it was for breach of the settlement agreement.
The case illustrates that the parties to a settlement agreement of a patent dispute must contemplate and provide for the possibility of further disputes, and action, being necessary. If such action is precluded by the terms of the agreement, any redress must be sought through breach of contract.
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Paul England
Paul is a senior associate and professional support lawyer in the Patents group based in our London office.