Earlier this year, the English High Court ordered pre-action disclosure against a patentee licensing company, forcing it to disclose the terms of existing licences to enable the alleged infringer to decide whether it should take a licence for the sake of commercial expediency, or defend patent infringement proceedings.5
Big Bus, a company which operates open top bus tours, had been approached by a patent licensing company, Ticketogo, to take a patent licence for an internet ticketing system. It already had over 60 licensees, mainly in the transport sector but some also in the entertainment sector. A series of pre-action letters were sent by Ticketogo with demands for Big Bus to take a licence as the other licensees had done, and on one occasion Ticketogo attached a list of its existing licensees.
Big Bus made an ‘unprecedented’ strike and applied for pre-action disclosure of all of Ticketogo’s existing licences. It reasoned that it needed to understand the level of licence fee it was expected to pay in order to assess whether it was commercially more sensible to take the licence or defend any future infringement proceedings, knowing that a significant portion of its litigation costs were likely to be irrecoverable, even if it won at trial.
The judge granted the order for the preaction disclosure by the patentee of all of its comparable licences (those in the transport sector).
The court applied a two-stage test, assessing whether: (i) the documents could be subject to pre-action disclosure; and, if that was the case (ii) the court should exercise its discretion to order such disclosure.
Under the relevant rules,6 the court has the power to order pre-action disclosure of documents provided that (i) those documents would be disclosed anyway in the proceedings and (ii) disclosure is desirable to dispose fairly of or avoid the litigation or to save costs.
Ticketogo made the point that with IP cases it is usual to have a split trial with liability first and quantum being heard only if liability had been established. It followed that disclosure on quantum takes place much later. In response the Judge made it clear that liability and quantum could be tried together.7
The judge accepted Big Bus’s position that the costs of fighting any patent case could outweigh the quantum of any claims, and cited examples from his own case load to support this. He also accepted the submission ‘that disclosure of the existing licences is desirable since it would allow Big Bus to establish the value of Ticketogo’s claim and thus assist the resolution of the dispute by an informed settlement.’ For these reasons the judge considered the first stage of the test to be satisfied.
The court then went on to consider whether it should exercise its discretion to order the pre-action disclosure. The following issues were considered: (i) the confidentiality of the licences; (ii) the burden of disclosing the licences; (iii) the commercial implications on Ticketogo of disclosing the licences; and, (iv) whether disclosure of documents going to quantum was necessary from Big Bus as well.
The judge considered it straightforward for Ticketogo to write to each of its licensees ahead of any disclosure thus giving them notice to object to the court, with any objections being most likely overcome by the establishment of a confidentiality club to maintain confidentiality and limit the persons who could inspect the documents.
Ticketogo argued that the forced disclosure of its licences would quash its freedom to negotiate, as knowledge of other licensees’ royalty rates would hamper its ability to maximise fees. The judge did not consider this a valid objection: ‘Availability of price information is one of the key requirements for the proper functioning of any market, and I see no reason why the market for patent licences should be an exception to that rule. Why should Big Bus be obliged, if it does not wish to litigate, to accept whatever royalty rate Ticketogo now sees fit to offer it, if a court would award less by [way] of [sic] damages? Accordingly, I consider that it is appropriate to exercise my discretion in favour of disclosure.’
Ticketogo submitted that Big Bus ought to be able to evaluate the appropriate royalty rate independently, as other licensees had done. The judge disagreed. He felt that there was no good reason why Big Bus should have to fight and lose the case in order to find out what it had to pay Ticketogo.
Ticketogo finally submitted that if disclosure was ordered against it, then disclosure for quantum should also be ordered against Big Bus. Counsel for Big Bus accepted in principle that this was a fair request; ‘what was sauce for the goose was sauce for the gander’. The judge encouraged the parties to reach an agreement in this respect. In this case, Ticketogo had set out its position too late for the Judge to deal with it in the hearing.