There once were submarine patents, living a quiet and inconspicuous life underwater, only to surface one day with a resounding splash.
Turns out what we do sometimes have in France is submarine patent cases. A recent ruling by the Lyon Cour d’appel could be considered as one of those.
In fact, Paris has exclusive jurisdiction over patent matters since November 1, 2009. Thus, I was more or less convinced I would never see again a patent revoked in a provincial court – but I was wrong.
Chavanoz Industrie, proprietor of European patent No. EP 0900294, filed an infringement suit against Mermet SAS in 2009, a couple of months before the November 1 date, and thus in Lyon. The first instance judgment was issued in September 2016.
I assume that the main reason why this lingered for such a long time is that the defendant merged in 2011, and then underwent insolvency proceedings in 2012. In 2013, a so-called continuation plan was ordered.
At any rate, the Lyon TGI hit late, but it hit hard, as the patent was held valid and infringed, and a damages award amounting to a total of more than 25 million euros was issued.
However, the ruling was fully overturned on appeal, a few weeks ago, as the Cour d’appel had a different appreciation of a key aspect of the case from the TGI.
The patent at stake was filed on April 16, 1997, claiming a French priority of May 7, 1996. It was granted in 1999 and limited by the French patent office (INPI)… in 2017, just a few days before it expired. Unusual enough, but wait until you read about the rest of the case.
Claim 1 of the patent as limited reads as follows:
Composite yarn for making a technical fabric for an awning, said yarn comprising a core composed of a continuous yarn made of glass, and a coated sheath composed of a matrix consisting of at least one chlorinated polymer material, for example a polyvinyl chloride or PVC, and a fire-retarding filler incorporated into and distributed within the said matrix, characterized in that, in combination, on the one hand the fire-retarding filler comprises a ternary composition which combines an oxygenated antimony compound, for example antimony trioxide, a hydrated metal oxide, the metal of which is chosen from the group consisting of aluminium, magnesium, tin, zinc and lead, for example an alumina hydrate, and a zinc borate and, on the other hand, together with the said ternary composition, the total weight content of inorganic matter in the yarn is between 4% and 65%.
The alleged infringer asserted that the invention had been made available to the public before the priority date of May 7, 1996, because the patent proprietor Chavanoz had supplied the patented yarn to (among others) a third party, Helioscreen.
Chavanoz responded by relying on a confidentiality agreement signed with Helioscreen on April 9, 1996.
The court had to deal with three thorny issues:
- Chavanoz stated that most of Mermet’s exhibits relating to the alleged public prior use were illegally obtained, in view of the confidentiality agreement, and that they should thus be disregarded by the court.
- Then there was the question of whether the supply of the yarn in question was indeed a public disclosure or whether it was confidential.
- Then there was the question of whether the skilled person would have been able to arrive at the claimed invention by analyzing the supplied yarn, at the priority date.
First things first, the fate of the exhibits.
In support of the public prior use allegation, the infringement defendant filed a number of documents, such as invoices, orders, letters, between the patent proprietor and the third party Helioscreen. These documents were, as far as I understand, willingly provided by Helioscreen. Chavanoz protested that this was in breach of the Chavanoz-Helioscreen confidentiality agreement of April 9, 1996.
The first instance judges agreed and thus discarded the evidence. But the appeal judges came to a different conclusion.
The 1996 confidentiality agreement recites that the parties have been cooperating since May 9, 1994 in the business of technical fabric. Helioscreen provided specifications, Chavanoz made yarn and supplied it to Helioscreen, together with some technical information, Helioscreen made fabric with this yarn and supplied samples of said fabric to Chavanoz for testing. The agreement then basically states that all information, documentation, products exchanged between the parties is confidential, and that the agreement itself is confidential. The agreement also mentions that it is retroactive back to May 9, 1994 and that it will remain in force as long as all of the confidential information has not been made available to the public.
The appeal judges held that the confidentiality agreement expired in November 1997, when the patent application was published. Therefore, Helioscreen was free to provide any documents and information to Mermet. Besides, Mermet was anyway not bound by the confidentiality agreement and was free to provide any material obtained from Helioscreen in order to build its defense. In fact, Helioscreen was not sued by Chavanoz for breach of the confidentiality agreement.
As a result, all of the exhibits filed by Mermet were deemed admissible.
I am not necessarily convinced by the argument that the confidentiality agreement expired when the patent application was published. Indeed, the information exchanged by the parties could possibly extend beyond the contents of the patent application. Notwithstanding, it seems only fair that Mermet, as a third party to the agreement, should be allowed to rely on whatever evidence is at its disposal as a defense in the infringement suit.
This brings us to the second point, namely whether the exchanges between Chavanoz and Helioscreen were confidential or not.
The court analyzed in detail the evidence at hand, and concluded that several dozens of tons of so-called M1B1 yarn were sold by Chavanoz to Helioscreen before the priority date of May 7, 1996. The yarn was first experimented in 1992, but by 1995, the production of the yarn was on an industrial scale. The court further noted that there is no evidence that the formulation of the yarn changed as from 1995-1996, or that the product was still in development – even though further yarn colors were later designed.
Besides, the M1B1 yarn was also supplied to other fabric manufacturers, including Mermet itself and another company called Brochier, in the context of the professional association ScreenGlass, in order for all manufacturers to provide feedback on the yarn.
The court also established that the fabric made by Helioscreen from the M1B1 yarn was sold to various clients before May 7, 1996.
No written confidentiality agreement was in place when all these exchanges took place; in particular, no exhibit on file bears the mention “confidential“.
The court then stated that “there is never a presumption of confidentiality in the context of a relationship with a buyer“.
Next, the appeal judges turned to the confidentiality agreement of April 9, 1996, which, as a reminder, states that all prior exchanges with Helioscreen were confidential. The court was unimpressed by this statement:
The reality of the amounts supplied to Helioscreen and the reality of the industrialization phase emphasized by Chavanoz Industrie itself in its commercial correspondence are never mentioned [in the agreement]. The content of the deliveries that are mentioned only relates to “samples”.
It is thus important to determine if a company that has already disclosed its invention to a partner not subjected to an obligation of confidentiality at the time of the disclosure can erase the existence of this disclosure, which may be novelty-destroying, by signing a confidentiality agreement after the facts.
The public policy provisions of patent law prevent parties to an agreement, from depriving a disclosure which has already occurred of legal effect, even with a retroactive effect.
An invention is made available to the public when it is disclosed to a person not bound by confidentiality at the time of the disclosure, so that the retroactive provision in the above confidentiality agreement has here no effect on the appraisal of the validity of the patent.
Long story short, the particulars of the supply of M1B1 yarn by Chavanoz were deemed incompatible with the notion of an implicitly confidential sampling. And a public disclosure cannot be turned confidential ex post.
There was a side argument by the patentee that Helioscreen’s sale of fabric to their client Krüland was a non-prejudicial disclosure under article 55 EPC. This was considered as irrelevant by the court, since overall the public prior use took place even before 6 months prior to the priority date.
The third point at last. Chavanoz argued that the skilled person would not have been able to know the composition of the M1B1 product at the priority date without undue burden.
The defendant performed a number of experimental tests to counter this theory. First, they made the patented product according to the method taught in the patent, and then had the product analyzed. Second, they had a bailiff collect samples of the M1B1 yarn dating back to 1994 in Helioscreen’s premises, and had those analyzed as well.
The manufacturing was performed in the presence of a bailiff. All analyses were conducted in two independent labs, using analysis methods available at the priority date. Various experts’s reports were produced on both sides, either to challenge the results of the analyses, or to support them.
I will not go over the details of the discussion, which was technically quite complex, but it will suffice to say that the court was ultimately not persuaded by Chavanoz’ criticisms, and accepted Mermet’s conclusion that the M1B1 yarn could indeed be determined by the skilled person as falling within the patent claims.
As a result, claims 1, 2, 3, 5, 7 and 8 of the patent were deemed to lack novelty and were revoked, and Chavanoz’ infringement claim was dismissed.
Let me say that this decision is overall well reasoned and makes for an excellent read. I am therefore looking forward to the next submarine from Lyon – if any.
As a take home message, confidentiality agreements should really be put into place initially. There is no way back once a business relationship has started on a non-confidential basis.
CASE REFERENCE: Cour d’appel de Lyon, 1ère chambre civile A, September 12, 2019, SAS Mermet et al. v. SARL Chavanoz Industrie, RG No. 16/06896.