Last month, Managing IP held two European Patent Forum USA events in San Jose and New York. Some of the highlights from the panels at the New York event are below. You can also read our write-up of the keynote address by David Ruschke here.
The future of the Unitary Patent system
In a session on the Unitary Patent and the Unitary Patent Court, Leythem Wall of Finnegan Henderson Farabow Garrett & Dunner noted that 14 states have ratified so far, with Germany and the UK the most important of the states that have not yet ratified. Wall noted that this was supposed to be the conference where the imminent implementation of the UPC was discussed, but the UK and Germany have derailed this. The UK’s plans were thrown into disarray by Brexit but the government has confirmed it is proceeding with preparations to ratify the UPC Agreement.
A potentially even bigger spanner has been thrown in the works by Germany, where a suit has been lodged in the Constitutional Court concerning German ratification of the UPCA that will cause delay, with any timeline difficult to predict. “It looks like the UK will be ratifying the agreement next month,” said Wall. “But it also looks like something has happened in Germany and for once we don’t have to blame the UK for everything!”
Professor Maximillian Haedicke shed some more light on the German Constitutional Complaint. The argument of the complaint is threefold: I) Does the UPC Agreement violate European Union Law? II) Is there an insufficient position of UPC judges which violates the rule of law? III) Is there insufficient democratic legitimization of encroachments of fundamental rights through the UPC Agreement?
Haedicke discussed the timeline for Germany. If the German Constitutional Court considers the constitutional complaint to be inadmissible or manifestly unfounded, it may reject the application by a unanimous decision. A decision regarding this issue is expected in the spring of 2018. If the court considers the complainant to be admissible, a trial will take place, and only then will the Court decide whether the complainant is founded. If a hearing is scheduled, a decision is expected in fall of 2018 at the earliest and then ratification by Germany could happen in spring 2019. After the phase of provisional application, this would give a late 2019/start of 2020 entry into force of the entire treaty.
Giving a US in-house counsel perspective, Paul Coletti, associate patent counsel, Johnson & Johnson, said “it sounds like there are some real issues”. He said: “I am telling my clients we have made progress, it looks like there might be a UPC at some point, but don’t hold your breath just yet.”
Coletti said it sounds like the UK patent community sees a way through the Brexit issues. “But the one thing I do worry about is the idea of UK practitioners and UK citizens submitting final judgment to the CJEU,” he said. “What it says is: ‘You folks who just voted to be out of the European Union are now subject to European Union rules at least in the final say.’ There seems to be some disconnect there for me. It is worrisome.”
Louis Trolio of Finnegan said it would be a shame if the UPC does not see the light of day after all the effort that has gone into it. “The biggest regret I would have are the reduced costs associated with the UPC. The UPC is really attractive. The biggest relief if it does not happen is the ability to have single revocation action. If the UPC goes forward that is a major hurdle for some clients.”
FRAND and SEPs in Europe
A panel on FRAND and standard essential patents discussed Huawei v ZTE, in which the CJEU set out a number of steps that should be followed in SEP patent licensing negotiations.
Adrian Howes, senior litigation counsel at Nokia, noted that if the counter offer is rejected “then we end up in an interesting situation”. The implementer is obliged to then provide some kind of security but the judgment only said it should be an appropriate security.
“So one of the big questions coming out of the CJEU decision is what kind of security is supposed to be provided by the implementer,” said Howes. He added that another question is what happens if the counter offer is not considered FRAND, because the problem is the CJEU doesn’t really say what to do next. “In my view, if the Court of Justice had avoided some aspects of the obligations with FRAND counter offer it might have made things a little bit easier,” he said.
Matt Hervey, director at Gowling WLG, summarized the Unwired Planet v Huawei judgment, handed down by Mr Justice Birss of the UK Patents Court in April 2017.
“The key points are first of all it is subject to an appeal so we don’t really know where it is going,” said Hervey. “Secondly, it is fundamentally a contract case rather than antitrust in the way it played out. And very importantly, you can diverge from FRAND in negotiations without breach of competition law.”
Hervey added: “This was the first UK determination of a FRAND rate, and the really dramatic point is they decided that there is only one FRAND licence possible and it is global.”
Hervey said another point is that comparable summary is perhaps the only way of determining what the rate should be. “That is a real issue for some parties, whether they are willing to disclose past licences and that confidentiality levels will be maintained,” he said.
Hervey asked the other panellists: “What do we think of this amazing land grab by the UK court?”
Nokia’s Howes said: “It is a pragmatic solution to a real problem. If done on a territory by territory basis, it is just unworkable. It also ends up with essentially realistically becoming impossible for licensing to take place in a standards situation if you have to litigate in every court in the world. From a Nokia position, we have always been very much of the view that arbitration or third-party determination of FRAND is the way forward. It is a cost effective way of dealing with the actual situation.”
Marc Sandy Block, intellectual property counsel at IBM, described Unwired Planet as “like a textbook on FRAND”. He added: “It discusses what law should be applied, it discusses the substance of FRAND.”
Unwired Planet was also discussed on a separate panel on UK court decisions. Tess Waldron of Powell Gilbert noted: “The FRAND trial was something of a beast – you can imagine the confidentiality nightmare that ensued.”
Conclusions given from Unwired Planet given by Waldron were: it is very significant for SEP owners; if SEP is found to be valid and infringed, and a global SEP portfolio licensing offer has been made, the English court can determine whether or not it is FRAND and adjust if not FRAND; the perceived exposure to anti-trust counterclaims is reduced; rates offered in negotiations may be above FRAND and the framework for FRAND negotiations set out in Huawei v ZTE need only be applied fluidly; a FRAND injunction can be granted against putative licensee if it will not enter into a SEP portfolio licence determined by the court to be FRAND; and such an injunction is extinguished once a licence is entered into. Waldron concluded the case “made the UK very attractive for SEP disputes.”
Software patenting protection across EU and US borders
Albert Keyack, EPO Attaché to the United States, gave an overview of the patentability of computer-implemented inventions at the EPO, including some recommendations for US applicants. This includes stressing that software is patentable in Europe, if the technical problem is solved in a non-obvious way. Applicants should identify technical purposes, effects, problems and technical considerations underlying their invention or features thereof, and disclose in the application as filed.
Keyack added: “Where we make it tough is to show an inventive step, because inventive step has to illustrate both a technical problem and a technical solution. What we are seeing a lot of American companies do is taking a US originated case and rather than filing it at the USPTO they are sending it first to counsel in Europe and having it amended a little bit, so that when it hits the EPO it will flow more smoothly through the system. You are not totally redrafting the claims to conform to European standards, you are just making sure the specifications of the claims are in a state that will allow qualified counsel to do their best job to get the broadest claims for that invention. Although the first hurdle is easy the second hurdle is tough.”
Moderator Jeremy Smith, associate at Kilburn & Strode, stressed the point of US companies bringing in European counsel early in the process. “One of the aspects of the EPO that we find a bit frustrating as a patent attorney is the level of strictness applied in the test of added subject matter. What that means is when you have got a pending European application you are very tightly bound by what is already there and you can’t bring in any words that weren’t there before. Even the words that are there, you have to be able to prove that you are able to put them into the claim in that particular combination of features.”
Smith continued: “So if I am given a case from the US and it is pending at the EPO there is only so much I can do to make it better. I have got the limitation of what is there and it is very common that I will have the sort of case where I wish I’d been able to start this process earlier because an hour of my time earlier in the process would have produced a lot more fruit than an hour of time can now.” He said in an ideal world the European attorney would be involved before the first filing in the US to help with getting the right language for Europe.
Moshe Malina, director, chief patent counsel, Citigroup, lamented the turnaround in the difficulty of patenting software inventions in the US. “It used to be a lot easier to get a software patent in the US really versus anywhere else, particularly the EU. Over the years that has become more predictable in the EU, which is the exact opposite to the US, particularly given recent court cases.” He noted that hurdle one in Europe is analogous to Section 101 in the US and hurdle two is similar to 102 and 103, but principally 103.
Lee Pham, counsel, IP law and strategy, American Express, expressed frustration at how hard it is for his company to get certain patents in the US.
“Just because the filer is a bank or financial services, it does not mean the claimed invention is a business method,” he said. “That’s a particular prejudice that I think we face both as applicants before the Office but also in conversations with partners and competitors. We endeavour to include as much of the invention in the claim as we can and software is an enabling element to that but not the only enabling element to that.”
Patent litigation in the life sciences sector
In a panel on life sciences litigation. Judith Krens, partner at Taylor Wessing, gave an overview of the Netherlands. Bayer v Sandoz in 2016 is the latest Supreme Court judgement on equivalents in the Netherlands. The Supreme Court ruled that the question which has to be answered is: do the claims, read in light of the description and drawings, leave room for equivalents, taking into account one the hand a reasonable protection for the patentee and on the other hand the legal certainty for third parties? The will or the intent of the applicant to renounce such protection does not play a decisive role.
Simon Cohen, partner, Taylor Wessing, discussed the situation for the UK. This included the new UK law from Actavis v Eli Lilly. He said a striking aspect was that the Supreme Court clearly intended that the scope of protection can extend beyond the meaning of the claim (and not just beyond the literal meaning but beyond what the claim would mean, in context, to the notional addressee of the patent). Previously – and for a long time – the courts in the UK had approached the question as a matter of not of literal but of "purposive" construction.
The panelists noted there had been harmonization of the law in the UK, the Netherlands and Germany, with the outcome being similar in all three jurisdictions. Overall, the scope of protection has been broadened by the recent decisions in UK, the Netherlands and Germany. The UK and Germany has a stepwise approach, whereas in the Netherlands there no strict steps to be followed. However, this harmonisation could be overstated. Cohen noted: “Judy suggested somewhat optimistically that they coming together. I think there is still a way to go.”
Giving the US perspective, Mary Morry, executive director, senior counsel, IP litigation, Merck Sharp & Dohme, commented: “The tests are different. The Netherlands is closer to ours at least in terms of words, compared with the UK and Germany.”
Patent enforcement strategies in Europe
Yohan Liyanage, partner at Linklaters, said that litigation is often much faster in many European jurisdictions than in the US. Cases can progress more quickly in jurisdictions that are less significant, with parties required to set out position in Europe first. This has the potential for an adverse impact on US. The different speeds within Europe can also have significant consequences on the choice of forum and issues arising from bifurcation of infringement and validity, particularly in Germany.
Liyanage discussed timing strategies. He said when commencing actions, consider staggering actions with Europe starting significantly later, establish a hierarchy of jurisdictions and keep them under review, and local counsel need to be willing to drop/amend arguments to align with global strategy. Within Europe, Germany remains a patentee-friendly jurisdiction but stay of infringement action is more common. A UK revocation action remains a popular defensive strategy to German infringement action. He suggested considering pre-emptive action, with declaration of non-infringement or revocation action to obtain acceleration of EPO opposition.
Lynda Nguyen, director, dispute resolution, Regeneron Pharmaceuticals, said in Europe companies have to make arguments and take positons earlier. “So being able to assemble a global team that can coordinate early on is essential,” she said. Julia Schonbohm, partner at Linklaters, commented that in the US parties do not like to have anything in writing until the institution of IPR. “In the US you hide your story, whereas in Germany you do not do that. It doesn’t reflect very well so you have to have your story ready!”
The panel also discussed differences in strategies for experts. Procedures for evidence are generally more limited in Europe than in US, with no discovery in many European jurisdictions. Regeneron’s Nguyen commented: “I would not want to use the same expert in Europe as in IPR. They are subject to a deposition. And in the US they can be subject to as many as two depositions, with claim construction early on and then in support general expert discovery. So the expert is really vulnerable.”
Linklaters’ Liyanage said a recent development in the UK is the Australian concept of hot tubbing, where the two sides’ experts take the stand together. They are asked questions by the judge, who will try and assess what the areas of common ground are and what the areas of difference. “This is something new to the UK, it has not been used that much, but it is something that might be more common in the future,” he said.
Hot tubbing was used in the Unwired Planet case. “This creates considerable discomfort when you are choosing your experts,” said Liyanage. “It might be your expert will become deferential to the other side’s expert, which would obviously be very disadvantageous. The fields are often very small so you may have someone who was a mentor to another.”
Obtaining evidence of an infringement in Europe
Alex Henriques of Kirkland & Ellis discussed the UPC. It has a front-loaded procedure, with no skeleton arguments. This means parties should set out their full case as early as possible in proceedings. All three stages of written procedure, an interim procedure and oral procedure should be completed within one year. In light of the very tight schedule, during discovery it is essential to offer to the claimant prompt and efficient measures to preserve evidence of the alleged infringement.
Floriane Codevelle of Casalonga gave an overview of the French Saisie-Contrefaçon. She explained the seizure report can be used as evidence of the alleged infringement before a competent Court of another EU country. This is more difficult in non-EU countries due to blocking statutes but it is a possibility under the Hague Convention.
Dr Martin Herzog spoke about the German inspection. The petition must contain: the address of the competent court; the address of the claimant; the address of the defendant; litigation value; the claims; and name of the expert; and reasons. The seven reasons are the most important part, and consist of: patented invention; claimant; opponent; object of inspection (production of a document or inspection of an item); sufficient likelihood of infringement; necessity for the purpose of establishing the claims; confidentiality interests of the opponent; and appropriateness in the individual case.
Mikkel Bender of COPA gave an overview of the Scandinavian inspection. In Denmark, the order is decided, and usually granted, by the bailiff that is not specialized in IP law in the relevant jurisdiction. In Sweden, the order is decided by a specialized IP court, following a proprietor or licensee rendering likely ex-parte that a valid right exists, infringement or preparation for infringement is taking place, and evidence that infringement (or the extent of that infringement) is present at a given specific location. Usually no preliminary notice is given to the defendant in Scandinavia, which enables the petitioner to obtain evidence of alleged infringement that may otherwise be hidden by the defendant. In Denmark the defendant is given a chance “on site” to convince the bailiff that there is no infringement, thereby preventing the obtainment of evidence.