|Despite harmonisation, national laws vary significantly when it comes to patent litigation. One of the biggest differences concerns the bifurcation of the consideration of validity and infringement, which takes place in Germany but is feared by practitioners in many other countries. The proposed Unified Patent Court provides for bifurcation in certain circumstances, but critics fear it will enable patent owners to put undue pressure on defendants based on rights whose validity has not been fully tested. The contrary argument is that bifurcation provides cost and time savings, respects the technical expertise of patent offices and gives confidence to owners of patents, thereby promoting further investment in innovation. As such, its role in the UPC should be welcomed.|
All EU member states will be able to participate in the proposed European Unified Patent Court (UPC). The Court will hear cases regarding infringement and revocation proceedings of European patents that are valid in the territories of the participating states. A single court ruling will then be directly applicable throughout the respective territories.
Bifurcation in the UPC
The agreement on a Unified Patent Court, which still needs be ratified, foresees a number of different scenarios regarding infringement and revocation proceedings. If an infringement action is initiated before the central division of the UPC and a counterclaim for invalidity is brought before the central division, both infringement and validity will be dealt with together. This is normally and traditionally the case in the United Kingdom and United States.
However, if an infringement action is initiated before a local or regional division of the UPC and a counterclaim for invalidity of the patent is brought before the local or regional division concerned, Article 33.3 of the UPC Agreement foresees three different scenarios:
- The local or regional division concerned may decide to proceed both with the infringement action and the counterclaim for invalidity together (in this case it has to request the allocation of a technically qualified judge with qualifications and experience in the field of technology concerned).
- The local or regional division concerned may alternatively decide to refer the counterclaim for invalidity to the central division and, depending on the circumstances of the case, either suspend or proceed with the infringement action (Rule 37.4 of the draft Rules of Procedure of the UPC provides further guidance to the local or regional division on the criteria to consider when deciding whether to suspend or to proceed with the infringement action).
- The local or regional division concerned may, with the agreement of the parties, decide to refer both the infringement action and the counterclaim for invalidity to the central division, where they will be dealt with together.
This so-called bifurcation (meaning the act of forking or dividing into two parts or branches) of the proceedings as is the case in option (2) will, for the English-speaking world, be somewhat unusual, as it is not generally the case for patent proceedings in the UK or US. Having said that, US companies have learned recently about the interdependency of infringement lawsuits and validity proceedings similar to the UPC based on the interdependency of US ITC and IPR proceedings.
In general, bifurcation places a clear emphasis on the patent infringement, once close scrutiny has determined that the granting of the patent was valid by law in the first place. The local or regional division will closely review the situation at hand and will then refer the case to the central division without suspending the action only if it is not apparent that the validity of the patent is not given. After all, what sense is there in granting patents, if these can immediately be disputed by a court that does not have the extensive know-how of the patent office that originally issued the patent?
Patent owners make reasonable investments not only in R&D but also in patent prosecution. Patent offices employ highly qualified professionals in specialist fields who spend their entire time dealing with their specialist areas. It therefore goes without saying that these people are absolute experts in their respective fields–experts who are not immediately available to the local or regional divisions (hence the request for allocation of a technically qualified judge with qualifications and experience in the field of technology concerned, if a decision is made to proceed with the infringement action and the counterclaim for invalidity together).
"The UPC will make use of the bifurcation system, which makes perfectly good sense and is something that should be embraced and not feared"
Due to the fact that bifurcation will generally result in an earlier decision concerning the infringement than the invalidity, a so-called settlement gap will occur, thus putting the alleged patent infringer under a great deal of pressure. On the other hand no patent owner will make a frivolous attempt to enforce a decision in his favour as he will have to compensate for damages for unlawful enforcement. Experience in Germany with the established national system has shown that this generally leads to good results, namely settlements providing conclusive legal certainty for the parties involved. However, a recent draft on the rules of procedure aims at speeding up the procedure for validity in such a way as to provide a decision on validity before any decision regarding infringement. This would not do justice to the far more difficult issue of validity and certainly have a negative effect on the quality of results.
Benefits of bifurcation
Experience with the German patent system has shown that bifurcation is particularly appealing, as it is regarded as relatively quick and affordable. The defendant will quickly be put under pressure, as he cannot hide behind contesting the validity of the patent (which would then anyway be verified by official experts who can by no means be as competent as the experts in the EPO). With the UPC, plaintiffs can choose their court of jurisdiction, and can expect quicker results, as the defendant will not be able to prolong the proceedings (thus incurring additional costs) by first trying to ascertain the invalidity of the patent. In the case of bifurcation, the validity of the patent is simply understood ("to a sufficient degree of certainty"), meaning that action for nullification of the patent cannot postpone the actual proceedings relating to the claim for infringement of the patent. But even in less clear-cut cases, the thoroughness of the entire judicial process is still assured, as, in the end, the proceedings will be decided in the second instance by the central division of the UPC, with the allocation of a technically qualified judge. This is similar to the current practice in Germany, where the BGH acts as a kind of central division or final level of jurisdiction for both infringement and validity.
When weighing up the pros and cons of bifurcation, one has to consider the basic idea of patents and the reason for granting them in the first place. Patents are a form of intellectual property and are granted to inventors or assignees for a limited period of time in exchange for detailed public disclosure of an invention. These inventions can be all manner of products or processes that provide a solution to specific technological problems. In short: patents are one of the factors that keep society constantly reinventing itself. Such innovations ensure economic and technical progress and form the backbone of modern innovation culture. They have implications for a country's economic strength, which is why it is in the interests of society to protect them as much as possible. However, if a patent owner is not able to assert his rights and is constantly forced to defend the validity of his patents (in costly and time-consuming proceedings), he may decide to hold back when it comes to the next invention, as the risks of not being able to offset the investment is too high. In summary, if the patent system does not provide sufficient protection for a party's investments, then patents will no longer be filed and progress will come to a standstill. The success of the entire patent system depends on a patent law that works and takes into account the original idea behind patents.
The UPC will make use of the bifurcation system, which makes perfectly good sense and is something that should be embraced and not feared, as it will provide clearer and quicker results. In our view, Germany is a good choice of venue, as this is where you will have the best (objective) chance of asserting your rights, as proceedings are generally quick and the courts are not bogged down with other, less important issues on the side. German courts have years of experience with these types of legal proceedings and have been extremely successful in implementing them over decades, which is underlined by the fact that the majority of patent proceedings in Europe are to this day carried out in Germany, and the majority of patent owners from all over the world choose Germany for judicial proceedings when they believe an infringement of their patent has taken place. German law – and with it bifurcation – is defined by a high rate of predictability regarding the outcome of proceedings. It is expected that experienced German judges will transfer to the UPC, thus ensuring that the high quality and reputation of the German system can be transferred to the UPC. Therefore, by taking on the same system, the UPC should see similar fair and high-quality results and quickly make a name for itself around the world.
|Gottfried Schüll||Arwed Burrichter|
© Cohausz & Florack 2014. The authors are partners and patent attorneys in Düsseldorf
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