'Crown use' defence in patent infringement claims hinges on authorisation

The Court of Appeal judgment (19 February 2021) in the case of IPCom v Vodafone [2021] EWCA Civ 205 has delivered a comprehensive review and interpretation of the law on the rarely used "Crown use" defence under section 55 of the Patents Act. Although multiple aspects of the first instance judgment were appealed, the Crown use defence was the only point of appeal that was allowed, in a main opinion given by Lord Justice Arnold.

The issue arose because there are often a lot of phone calls during an emergency that can overload mobile networks just when access is needed by emergency services such as the police. The UK government has put in place a scheme allowing emergency responders to ask to have privileged access to the network at this time. This is a voluntary service provided to the government free of charge by Vodafone.

Following this judgment if contractors supplying goods and services to the government wish to rely on the Crown use defence they should ensure express contractual authorisation is provided for specific patents that may be infringed, which may not always be known, or obtain authorisation for the act(s) that would necessarily use these patents. This may lead to commercial difficulties when negotiating such supply arrangements, for example around the inclusion of indemnities.

The judge at first instance held that Vodafone could rely on a defence of Crown use, meaning compensation for the relevant infringement was payable by the relevant government department rather than by Vodafone. The first instance finding that Vodafone's acts constituted "acts for the service of the crown" was not challenged. Therefore if the government itself had carried out these acts it would have benefited from the defence. However, other persons (such as Vodafone) must be authorised in accordance with the provisions of section 55 in order for it to apply. The issue under appeal was how the words "authorised in writing by a government department" in relation to the purported infringing use should be interpreted and, specifically, what form of authorisation was required to fall within its ambit.

Three possible interpretations of "authorised in writing by a government department" were considered, namely whether it:

(i) requires an express authorisation to work the patent in question;
(ii) requires either an express authorisation to work the patent or an authorisation to do a particular act in circumstances where that act necessarily infringes the patent; or
(iii) extends to an authorisation to do a particular act even if that does not necessarily involve infringing the patent.

The third interpretation was favoured by the judge at first instance and supported by Vodafone on appeal. IPCom argued for the second, while the secretary of state for defence, who appeared as an intervener, supported the first, save that the minister contended that an express authorisation to work any patent would suffice (rather than the particular patent in question).

Allowing IPCom's appeal on this point, the Court of Appeal held that the second interpretation was to be preferred. The main reasons for this were:

1. The language of section 55(1) – The second interpretation was said to be the most natural interpretation of the language. The government authorisation must be "an authorisation to do acts in relation to a patented invention, not merely an authorisation to do acts" (paragraph [150]).

2. Consistency with the law of agency – Although section 55(1) was not limited to agents of the Crown, authorisation is a familiar concept from the law of agency. The usual basis for implied authority under the law of agency is necessity. It was difficult to see why section 55(1) should exclude an authorisation to do an act which infringed a patent out of necessity, and equally difficult to see why it should extend to do an act which did not itself necessarily infringe a patent.

3. Historic case law supported the second interpretation – Previous decisions (despite pre-dating the requirement for authorisation to be in writing) had established that a contractor could rely on the defence if the contract "by necessary implication authorised the use of the patented invention" (paragraph [134]).

4. Retrospective authorisation unnecessary if authorisation to do an act was sufficient – There was also precedent that retrospective authorisation from the Crown expressly giving permission to work a patent or do an act which necessarily infringed a patent would not be needed if general authorisation to do an act was sufficient. This was inconsistent with the third interpretation.

5. Consistency with TRIPS – The first and second interpretations were more consistent with Article 31 of TRIPS, the international agreement on intellectual property rights, which permits use of a patent without its owner's consent. The more broadly section 55(1) was construed, the more inconsistent it became with TRIPS. The third interpretation was also inconsistent with the requirement in Article 31(a) TRIPS for the use of the subject matter of a patent to be "considered on its individual merits".

Additional reasons were given in the judgment, including taking into account the impacts on the Crown, underlying policy considerations and the view of the leading practitioner textbook. All of these reasons further underpinned the Court of Appeal's view that the second interpretation of section 55(1) was to be favoured.

Osborne Clarke Comment

This appellate-level analysis of the law on Crown use places further limitations on the already rarely relied upon defence for companies and individuals supplying goods and services to government. The up-front protection provided by section 55 has been limited to those situations where the identity of a patent is known or infringement is unavoidable – which may not be known until after trial. In order to maximise the prospect of successfully relying on this defence, a contractor is strongly recommended to seek express contractual authorisation from the government for use of the specific patent(s) of concern, or authorisation of the act(s) which would necessarily involve their use if its supply may infringe a patentfall within the scope of this patent or patents. If a general authorisation has been relied upon or a problematic patent is identified after work has begun then the contractor should seek urgently retrospective express authorisation if the Crown use defence is to be relied upon in a patent infringement claim.