Neutral Citation Number: [2009] EWHC 131 (Pat)
Case No: HC08 C02241
HC08 C02240
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 23/01/2009

Before:

MR. JUSTICE KITCHIN
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Between:

	SCHUTZ (UK) LIMITED	Claimant	
	- and -		
	WERIT UK 	Defendant	
     - and –
	(1) SCHUTZ UK LIMITED	Claimants	
	(2) SCHUTZ GmbH & Co. KGaA		
	- and -		
	DELTA CONTAINERS LIMITED 	Defendant	

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Transcript of the Stenographic Notes of Marten Walsh Cherer Ltd.,
6th Floor, 12-14 New Fetter Lane, London, EC4A 1AG. 
Telephone No: 020 7936 6000.  Fax No: 020 7427 0093
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MS. LINDSAY LANE (instructed by Messrs. Denton Wilde Sapte) for the Claimants
MR. TOM MITCHESON (instructed by Messrs. Lovells LLP) for the Defendant Werit
MR. AUBREY CRAIG (instructed by Messrs. Clough & Willis) for the Defendant Delta

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JUDGMENT

MR. JUSTICE KITCHIN: 

1.	I have before me the CMCs in these two actions.  In the first, Shutz sues Werit for patent infringement.  In the second, Shutz sues Delta for patent infringement, trade mark infringement and passing off.  Both are concerned with the same subject matter, namely intermediate bulk containers, otherwise known as IBCs, and the same patents.   Shutz is the exclusive licensee of the three patents in suit and the second defendant in each case is the registered proprietor and made a party pursuant to section 67(3) of the Patents Act.  
2.	IBCs are containers for the transport of liquids and flowable dry goods.  Shutz's IBCs apparently consist of two parts – a metal grid cage mounted on a pallet and an inner plastic bottle.  Both parts bear Shutz trade marks.  Shutz sells new and reconditioned IBCs and new inner bottles for use in Schutz cages.  All IBCs which are reconditioned by Shutz apparently contain new inner plastic bottles.  Werit also sells IBCs and, moreover, sells the inner plastic bottles to third parties such as Delta, who fit them into Shutz metal cages and sell the IBCs without, at least hitherto, removing the Shutz marks.  
3.	In these actions, Shutz complains that the activities of Werit and Delta amount to patent infringement and, in the case of Delta, trade mark infringement and passing off.  
4.	Originally both Werit and Delta counterclaimed for revocation of the patents and relied upon arguments of repair and exhaustion.  Delta, for its part, disputes the claims made against it for trade mark infringement and passing off and also relies upon exhaustion as a defence to those claims.  
5.	The history of the actions has been helpfully summarised for me as follows.  They began on 7th August 2008.  Defences were served on 18th September 2008 and replies and defences to counterclaim on 9th October 2008.  
6.	Initially, all parties apparently assumed that the two sets of proceedings would progress in tandem.  However, by letter dated 16th December 2008, and following a request by Delta, Shutz indicated it was prepared to agree to a stay of the patent claim in the Delta proceedings pending the outcome of the Werit action on the basis that, in addition to dropping the counterclaim for revocation of the patents, Delta agreed to be bound by the judgment on infringement and validity in the Werit action.  However, Shutz was not prepared to agree to a stay of the trade mark infringement and passing off claims.  
7.	I now have before me essentially two proposals for the hearing of these two actions.  Shutz proposes that the patent, trade mark and passing off claims in both actions be heard together at a trial in February 2010, with the evidence in the Werit proceedings to stand as evidence in the Delta proceedings and vice versa. They suggest that the trials should be preceded by a case management conference, following the service of evidence, to ensure that proper case management allows Werit and Delta to be absent for those parts of the trial with which they are not directly concerned.  Werit and Delta propose that the trade mark and passing off claims in the Delta proceedings be stayed pending the outcome of the Werit action.  
8.	In circumstances where all parties could afford to litigate actions of this kind, I think it tolerably clear that there would be no dispute that they should be heard together.  There will inevitably be a measure of overlap between them.  That overlap will include such matters as aspects of the background to the industry and technology concerning IBCs; whether and how adequately Werit bottles fit in to the Shutz cages; issues relating to the defences of exhaustion;  and evidence going to Shutz's market position, amongst others.  
9.	These particular actions are, however, rather unusual and raise the following particular further considerations.  First, Delta is a small family company and in comparison with Shutz and Werit is, I think it is fair to say, tiny.  In the year to 30th April 2005 it made a net loss after tax of some £4,000 and in the year to April 2006 a net profit after tax of some £16,000.  In the year to April 2007 its financial position apparently deteriorated again, with the result that it made a net loss after tax of some £900.  It expects to make another small loss in the year to April 2008.  There is therefore a real risk of Delta being overwhelmed as a result of an inequality of arms.  
10.	Second, although Delta is being sued for patent infringement, it has, in the financial circumstances in which it finds itself, recognised that it cannot afford to fight those allegations and does not wish to gamble the future of its business on the outcome.  It therefore seeks permission before me to amend its pleadings by deleting the counterclaim for revocation of the patents and also of its affirmative defence in relation to innocent infringement.  It is against that background that it has agreed to be bound by the judgment on infringement and validity in the Werit proceedings, as I have explained.  
11.	Third, I believe that, if the claim by Shutz for infringement of its patents succeeds, then the claims it makes in relation to infringement of trade mark and for passing off may well become redundant since Delta will not be in a position to continue with the business of which complaint is made.  
12.	I recognise that one of Shutz's patents will expire before February 2010 and, accordingly, if Shutz only wins on that patent it will not secure an injunction.  I also recognise that the claim for patent infringement appears to be limited to the combination of a Werit bottle in a Shutz cage.  If Delta begins to fit bottles made by yet other manufacturers into Shutz cages, then the patent proceedings may not be wholly dispositive.  Nevertheless, it does appear to me to be the case that success by Shutz in relation to the other two patents may, for practical purposes, be sufficient to secure its commercial ends.  
13.	Fourth, Delta has by counsel appearing before me this morning, Mr. Craig, offered an undertaking to the court that, henceforth and pending further order or agreement between the parties, it will remove or obliterate the Shutz trade mark from the face and the foot of the cages into which the IBC bottles are placed and also from the metal pallet upon which they rest.  This, it seems to me, will provide the claimants with substantial protection against the risk of further losses being incurred as a result of the alleged infringement of its trade marks and passing off pending the trial and determination of those claims.  
14.	All these matters suggest to me that the just and convenient course to adopt in relation to the management of these claims for patent infringement on the one hand and trade mark infringement and passing off on the other is to have them heard sequentially, with the patent infringement proceedings heard first in February 2010, and then, if necessary, the trade mark infringement and passing off claims heard on a date to be fixed, not sooner than October of that year.  That period will allow the parties to consider the effect of the judgment given in the patent claim and whether or not it is also dispositive of the trade mark and passing off claims, and, moreover, if it is not dispositive, an opportunity for the parties to attempt to resolve them without the need for the additional hearing.  
15.	Against this, I must however consider the various matters urged on me by Ms. Lane, counsel appearing for Shutz, as to why it would nevertheless be desirable and beneficial for all the claims to be heard together.  The first is that there is a substantial overlap between them.  As I have already indicated, I accept that there is a measure of overlap between the various claims, although it is not in my judgment such that they must necessarily be heard together. 
16.	Second, Ms. Lane submits that as a result of that overlap there is a risk of  inconsistent evidence and arguments being put forward if the claims are heard separately and as a result the judge will find it more difficult to resolve them without all the parties and issues being before him at one time.  I accept this is so and that there will inevitably be some risk of these problems arising.  However, the degree of overlap is not such that I anticipate that risk to be a very great one.  If it should prove necessary to try the trade mark and passing off claims, then I would hope that the time that I have allowed between the two hearings will ensure that both transcripts and the judgment will be available at the second hearing and that any risk of inconsistency will therefore be minimised.  
17.	Finally, Ms. Lane submits that having the actions heard separately will inevitably result in a waste of costs as a result of the duplication involved in educating the court in relation to the matters which involve a degree of overlap.  She suggests that if these actions are heard together, they may take a total of some ten days but she fears that if they are heard separately the patent action may take some seven or eight days and the trade mark or passing off action some four to five days.  
18.	I have to say that I think that is somewhat pessimistic.  I would hope that if the actions are heard separately the patent action could be dealt with in five to six days and the trade mark and passing off action in some three to four days.  As a result, I do not believe that having them heard separately will result in a substantial increase in the overall estimate that she has provided of ten days for the two actions heard together.  
19.	More importantly however, I am concerned that if these actions are heard together then the defendants will require to be represented throughout the whole hearing with the result that those representing Delta will have to sit through large parts of the patent trial and those representing Werit will have to sit through large parts of the trade mark and passing off trial.  That seems to me to be wholly wasteful and for the reasons I have given may be such that it would prohibit Delta from participating at all.  That, it seems to me, would be a wholly unjust result.  
20.	I have reached the conclusion therefore that the appropriate course to adopt is one which lies between that urged upon me by Shutz on the one hand and Delta and Werit on the other.  I do not propose to stay the trade mark and passing off actions but to direct that they be heard separately from the patent claim.  As I have indicated, it is anticipated that the patent action will come on for trial in February 2010 and I propose to direct that the passing off and trade mark action should come on as soon as possible after 1st October of that year.
(For proceedings after judgment see separate transcript)
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