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Wednesday, 28 March 2007

Who says patents are a licence to print money?

So far the IPKat has only found a note on European Central Bank v Document Security Systems Inc [2007] EWHC 600 (Ch) on LexisNexis Butterworth's subscription-only service. It's a Patents Court decision from Mr Justice Kitchin and Monday's ruling goes like this:

Right: the European Central Bank

DSS owned a European patent for a method of making a document incapable of replication by a scanning type copying device. The patent was particularly relevant for security documents like banknotes and travellers' cheques. Claim 1 of the patent provided for

"a method of making a document that is not faithfully replicable by scanning-type copying devices, the document using a visible original image comprising art, pictures and/or image forms made of curvilinear lines, dots and/or swirls, the method comprising the steps of ... ".
Integer D 1 of this claim described the process of
"overlaying the grid pattern on the original image to produce on the document a printed image which comprises the original image having a superimposed transmitted or obstructed print pattern conforming to the grid pattern ... ".
The patent application had been filed on 16 January 1990, claiming priority from a US application. Following a long period of gestation in which various amendments were incorporated, an EPO Board of Appeal finally allowed the application in 5 February 1999. By then, claim 1 was significantly different, although the specifications of the application and the patent were framed in virtually identical terms.

DSS later sued the ECB - a European instition - for patent infringement before the Court of First Instance, alleging that Euro banknotes were made by an infringing process. While those infringement proceedings were pending, the ECB applied to revoke DSS's patent on the ground of added matter, contrary to section 72(1)(d) of the Patents Act 1977. According to the ECB, the feature described by integer D 1 of claim 1 was not disclosed in DSS's patent application. DSS argued that, while integer D 1 might not have been explicitly disclosed in the application, its disclosure was implicit if you looked at the specification of the application rather than of the granted patent.

Kitchin J revoked the patent. He held that it was settled law that matter would be found to have been wrongfully added unless it was clearly and unambiguously disclosed in the application, whether explicitly or implicitly. In this case, however, the application was not merely silent on the point that was now said to be implicit: it actually contradicted the patent by describing a method that was different from that which was now said to be implicit. This being so, the patent was invalid.

The IPKat thinks this must be right in principle, even though he's not had a chance to read the text of the decision. The notion of the constantly-evolving patent claim, honed and crafted over the years in order to incorporate art rather than stake an initial entitlement to it, is something he associates more with US submarine patents than with the European species.

Right: The IPKat, not trusting the banks, prints his own money ...

Merpel wonders why the revocation proceedings were brought in England and Wales, when presumably it was open to the ECB to attack the validity of the patent elsewhere - or are there parallel proceedings in other countries? Can anyone tell her?

European Central Bank here
Print your own money here and here

15 comments:

David said...

The judgment is now available here from BAILII.

David said...

Funnily enough, the German Federal Patent Court found the same patent to be valid yesterday (see story here). What are the chances of the timing being coincidental?

Ron said...

It is not the first time English and German courts rule differently about a same case. Besides, the ECB has also intitiated invalidation proceedings in Luxembourg, the Netherlands, Austria, Italy, Spain, Belgium and France. Let's wait for these other rulings...
In any case, patent validity is only one side of the coin. DSS might have won their validity case before the German Federal Patent Court, but this does not mean that their infringment claim is founded.

Wrypage said...

So who is right - the British court or the German? Or can they both be right?

A lot i sriding on this for shareholders of DMC...

David said...

They are both right, of course, in their own jurisdictions. The English court decided the matter according to English law, and the German court decided according to German law. The German decision probably matters more though, as that is where the banknotes are made, according to my understanding.

By the way Ron, are you seriously suggesting that we wait for the Italian ruling before coming to a conclusion? I may have retired from the profession by then. Also, it's pretty much a certain outcome in Germany if the patent is valid; the claims will be infringed.

Connie said...

David,

Could you expand on your comment that “Also, it's pretty much a certain outcome in Germany if the patent is valid; the claims will be infringed.”

Are you saying that you are familiar with the patent and have ascertained that the method disclosed in the claims is indeed used in the euro?

I have read the patent claims carefully and have looked on the euro with a magnifying glass but cannot find "telltale signs" of the infringement, which I believe would be some form of truncated lines as shown in Figures in the patent.

(I also am a shareholder in Document Security Systems and have been trying to ascertain for myself whether there is indeed infringement, as so far the only opinions we have are those of interested parties, namely the company and the ECB.)

Thanks very much.

David said...

Perhaps I was unwisely jumping to conclusions, not having studied the matter in the detail you seem to have. I withdraw that comment for now, and will instead wait to see what the German court says.

Ron said...

Hi there ! Sorry for the delay ! I have just read the comments made by David and would like to a few more things:

First of all, Euro banknotes are printed in each and every country of the Euro zone. It is true that the ECB is based in Germany but my guess is that DSSI will have to demonstrate infringement in each and every country where the Euro banknotes are actually printed.

Secondly, patent validity and patent infringment are two distinct and separate issues. A valid patent is indeed a prerequisite for initiating any infringment case, but this does not mean that the patent is necessarily infringed.

Thirdly, I have looked deeper in the case and have performed a carefull reading of the British judgment. Infringment has not at all been addressed in this judgment. Only the validity of the patent has been discussed. The analysis performed by the English judge is very coherent and convincing.

I have not yet been able to find a transcript of the German judgment though.

Lastly, I totally agree with the comments made by Connie. I cannot see in what respect the Euro banknotes may be considered to infringe the DSSI patent.

Time will tell.

Anonymous said...

"First of all, Euro banknotes are printed in each and every country of the Euro zone." ...

Not only printed but issued ... see this note (ie missive) from Sanders Research.

Ron said...

It is worth adding that the ECB has the exclusive right to authorize the issuance of Euro banknotes within the Euro zone. It is true though that both the ECB and the national central banks may issue Euro banknotes.

As far as banknote production is concerned, this production is distributed among the various national printing works of the Euro zone (see for instance http://www.ecb.int/pub/pdf/other/euro_became_our_moneyen.pdf)

Anonymous said...

"It is worth adding that the ECB has the exclusive right to authorize the issuance of Euro banknotes within the Euro zone."

A lot of money is created through the mechanism of fractional reserve issuance rules ... how much control does the ECB have over this process?

Ron said...

The legal framework defining the competencies of the ECB and of the NCB's regarding the single monetary policy is defined in the Treaty establishing the European Community and the Statute of the European System of Central Banks (ESCB) and of the ECB.

Article 16 of the Statute of the ESCB and of the ECB reads as follows:
In accordance with Article 106(1) of this Treaty, the Governing Council shall have the exclusive right to authorize the issue of banknotes within the Community. The ECB and the national central banks may issue such notes. The banknotes issued by the ECB and the national central banks shall be the only such notes to have the status of legal tender within the Community.

The Governing Council is composed of the members of the Executive Board of the ECB and the governors of the national central banks.

It is therefore my understanding that the ECB indeed has a direct control on the issuance of the Euro banknotes, it being moreover understood that such issuance is one of the instrument available to the ESCB/ECB to achieve its primary objective, namely maintain price stability.

Anonymous said...

"It is therefore my understanding that the ECB indeed has a direct control on the issuance of the Euro banknotes,"

My problem is with the word issue (or issuance). The sense given in The Treaty is incompatible with the meaning of the word within a fractional reserve system. In this system, banks issue money, not governments/central banks. The latter can control the fractional reserve ratio and they pretend to control interest rates but the banks are the institutions that issue what passes for money.

This is confusing since there are two sorts of money within the system which are fungible.

David said...

There is an interesting analysis of DSS here.

Anonymous said...

The German ruling is available here
http://juris.bundespatentgericht.de/cgi-bin/rechtsprechung/document.py?Gericht=bpatg&Art=en&Datum=Aktuell&Sort=12290&Seite=1&nr=2692&pos=45&anz=456&Blank=1.pdf

Unfortunately, I do not speak German, and google translate has a particularly tough time with any technical documents. Has anyone been able to figure out how the German court disagreed with the British court on the matter of invalidity? Also, does the German ruling address the infringement aspect of the case at all?

I had seen in the British ruling that the judge briefly discussed the infringement case. Stating that the DSS patent taught that one must measure the scanning pitch/lpi at the scanning or input stage of a copier. However, in the infringement case, the British ruling states, that DSS argues that the Euro infringes because it creates moiré patterns at lpi resolutions applicable at the output stage, and that DSS was arguing two different interpretations of the patent in the validity vs. infringement cases. It would be interesting to see if the German ruling gives any similar types of insights as to what’s going on with the infringement case.

Does anyone know that if it was found that the DSS patent taught one to measure the scanning pitch distance at the input stage, instead of the output stage, would that be enough to derail the infringement claims (Assuming the Euro uses patterns based on measurement of a copier's output/printing phase)?

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