Patent problems

An offshore engineering firm was engaged by the head contractor engaged in the construction of an offshore windfarm to design a subsea pile template (“SPT”) to be used to assist in the driving of piles into the sea floor.

The engineering firm designed the SPT and it was being used in the construction of the windfarm when the firm received notice from a competing firm of engineers alleging that they held a European patent in respect of the piece of equipment and that the SPT infringed their patent.

The competing firm subsequently issued legal proceedings in which they claimed damages of US$ 2 million for the alleged infringement. They named the engineering firm, the head contractor and the end user in those proceedings.

The contract between the engineering firm and the head contractor included an indemnity in favour of the head contractor and the end user. This provided that the engineering firm was responsible for legal costs incurred in defending a claim arising out of the alleged breach of a third party’s intellectual properties. This type of indemnity is a common provision in such contracts.

Counsel’s advice was sought. The barrister concluded that there was a more than 50% likelihood that the engineering firm would be found to have not infringed the patent, and further that was a more than 50% chance that a court would find the claimant’s patent to be invalid due to a lack of novelty.

Nevertheless it was clear that there remained a significant risk associated with allowing a trial to proceed. In addition patent disputes are expensive to litigate partly due to the expert evidence required. Discussions took place with a view to settling the claim.

The claim was ultimately resolved with a contribution towards the claim for damages of US$ 250,000 and on terms which included a licence providing for the engineering firm to be able to continue to use the SPT in question. The legal costs incurred amounted to another US$ 250,000.