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Thursday, 22 March 2012

Scrutiny Committee: red-line the unitary patent proposals (Part II)

To some, this bifurcation diagram is a whole lot prettier
than what bifurcation of patent litigation
can end up looking like....
The bifurcation issue

Besides Articles 6 to 8, the issue that can divide some European patent practitioners the most is the issue of bifurcation. During the last Scrutiny Committee session Mr. Feinson admitted that if "we had it our way we would not allow for bifurcation" in the Draft Agreement. This time around, James Clappison MP asked Mr. Feinson to explain the Government's reasoning and their action on this issue. Mr. Feinson explained that bifurcation causes efficiency problems – running two actions instead of one and reaching a decision on infringement of a patent, before the validity of the patent is determined. Mr. Clappison MP stated that this point echoed the concerns that experts, particularly Mr. Henry Carr QC of the IP Bar, highlighted as being extremely problematic for businesses. The Government, Baroness Wilcox explained, is negotiating on the bifurcation point. She explained
"We would obviously prefer not to have this; we don't like it, but the Germans love it."
Presently worded, however, bifurcation is only an option: it is not compulsory. Much depends on the drafting of the Rules of the Procedure as to how bifurcation is instituted or applied in proceedings. To mitigate any affects of bifurcation, the panel explained, the Rules would also have to address the timing of the two cases so that one does not encounter a case where a party has been held to have infringed a patent that later is ruled to be invalid.

Mr. Phillips MP was unimpressed with this proposed attempt to mitigate the effects of bifurcation. Following an unsuccessful line of questioning to get Baroness Wilcox to confirm whether the bifurcation point was a red line issue, he stated:
"MR. PHILLIPS: Experience dictates that any reform, in any area of civil procedure, designed to speed up matters such as infringement proceedings, or indeed anything else, never really works. Is that really the only mitigation that the Government is able to suggest if bifurcation goes ahead?

BARONESS WILCOX: I think that we are negotiating, and as the negotiations go forward so we will reflect upon where we are.

NEIL FEINSON: Minister, if I may add, we did actually ask our stakeholders this very question-

BARONESS WILCOX: We did.
NEIL FEINSON: -about what their red lines are, particularly on Articles 6 to 8, bifurcation and a London seat. To a man/woman they said, "Well, we can’t actually give you that answer because this is a package. The issues are interrelated and we need to see the balance of the package against the status quo". That is very much our position. We are not going to draw a line in the sand definitively. We understand that bifurcation is a difficult issue for industry; we understand that Articles 6 to 8 is a difficult issue for industry. We will consult closely with industry in the endgame as to whether the deal is or is not worth doing, but if they themselves are not prepared to say, "This is a red line" or "That is a red line" I don’t think we should be doing so."
Mr. Clappison MP stated that, contrary to what Mr. Feinson stated, it was evident from the Committee that on the basis of the evidence received bifurcation was indeed a red line issue and that it was now a matter for the UK Government to take a position and determine whether the issue of bifurcation was or was not a red line issue.

The UK Government's position – does it have one?


The AmeriKat getting her teeth into some red lines....
Mr. Phillips MP pressed on, asking whether the issue of bifurcation was a red line issue or whether the UK Government would be willing to trade it for hosting the Central Division in London. Baroness Wilcox's reply that she, again, could not confirm the position of the UK Government, prompted Mr. Connarty MP to question why the Government could not reveal the strength of its negotiating position in any of the areas at issue in the unitary patent proposals. He stated:
"I must admit I remain as puzzled as Mr Phillips about why the Government cannot reveal the strength of its position in any of these areas. I just wonder what the point is of coming to give evidence that we are negotiating. People want to know, when people come to give evidence, what the Minister and the Government are standing for. Standing for negotiations, that we give up everything or we give up nothing, seems to me to be not a very satisfactory way of answering questions at a Select Committee."
Further discourse on transition periods (7 years, plus an additional 7 years) and general negotiations followed but, before the Committee moved on, Mr. Connarty MP said he feared that the stakeholders may be faced with a position on the unitary patent package that is "the worst of all positions" because they are not being afforded the guarantees on key issues of concern by the negotiator (i.e. the Government). "They might think they have been sold down the river by the Government if in fact the negotiation proves not to be quite so skillful or as effective as we all hope", he stated.

The Minister countered this criticism stating the stakeholders were conferring closely with the Intellectual Property Office and keeping them informed of their concerns throughout the process. The negotiation was not occurring "in a vacuum" she explained.

Any good lawyer will know that
color-coding tabs will help the
Government earmark essential issues
during their negotiations
Following the interlude on the location of the Central Court and the judges, the questioning in this vein rounded out the session with Mr. Connarty MP stating that the it was probably a cause of concern for stakeholders who have a Minister who cannot "tell us with some strength" that they have a position that they will fight for during the negotiation. The Minister replied that she
"… would love to say to you "Here is where we stand and this is it", but it is a negotiation. This is an open court. This will be reported in the press, and the press is read in other countries than this country. I do not want to totally reveal our position; I don’t think that would be right and proper for us when negotiating."
Mr. Phillips MP questioned whether the time had come for the Government to state unequivocally that some issues were earmarked as being essential to the UK, and if no one was willing to agree with them that they would stop negotiating. Baroness Wilcox responded that, to remain competitive with the US and Chinese patent systems, the UK must attempt to progress discussions for a European unitary patent system ["This may be true", says the AmeriKat, "but only if it is better than the system we already have - and the current proposal does not appear to be..."]. She said that if "there is a chance for us to get a single patent, then we will do everything we can to advantage the traders from Great Britain. That is what I am trying to do; that is what my Government is trying to do; and that is what I will continue to do for as long as I am privileged to be in this position."

In closing, the Mr. Cash MP requested that the Minister provide them with a note of the current state of affairs with stakeholders and that she and her team meet with the stakeholders in light of the questions that had been posed by the Committee.

What's next?

The AmeriKat understands that the IPO is holding the next consultation meeting with stakeholders during the first week of April and suspects there will be a degree of discussion on the issues raised during the last Scrutiny Committee session, as requested by its Chairman.  In the meantime, the AmeriKat is sure that the Scrutiny Committee is busy drafting various reports on the evidence that they have heard and received since January.

The AmeriKat was again struck by how little we know regarding the negotiation process and the UK Government's position.  Although one cannot expect to know every detail of the substance of the Member States' negotiations on the unitary patent package the radio silence as to the progress, where they are taking place, who with and/or deadlines is somewhat disconcerting.  The only signs of life on this issue seem to have come from the House of Commons and the European patent profession, including signs of disquiet in Sweden by way of a letter sent to the Confederation of Swedish Industries to their Ministry of Trade on 17 February (here) which stated that they and the Swedish negotiating team wished for Articles 6 to 8 to be deleted from the Proposed Regulation.  In addition, and somewhat ironically given last year's push to finalize the unitary patent proposals under the Polish Presidency, there are reports that sections of the patent profession in Poland are also unhappy with the proposals (see report here).

Kevin Mooney (Simmons &
Simmons) - Chair of the Rules
of Procedure
Committee
On the Rules of Procedure front, Kevin Mooney the Chair of the Committee on the Rules of Procedure, informs the AmeriKat that the Committee is still busy drafting with another busy weekend session to take place this coming weekend. The Committee hopes that they will be able to circulate the first advanced draft of the Rules to stakeholders before Easter.

Although the AmeriKat cannot place her paw on it, she gets a sense of dwindling enthusiasm throughout Europe to see the current unitary patent package through to further negotiations or later fruition. She fears that the latest proposals will be another footnote in the 40-year old history of these negotiations.

The AmeriKat thinks such an outcome would be a shame. There may indeed be problems with the current proposals, (not just Articles 6 to 8, she hastens to add) but the industry and stakeholders are engaged with these issues now and are in a position to resolve them.  If a unitary patent is ever going to happen, now is the time.

And least us not forget the poor committee members for the Rules of Procedure and their surely countless Pret A Manger sandwiches they have had to endure during their long weekends of drafting the rules ...

15 comments:

Anonymous said...

The bifurcation issue to me appears to be nothing more than a tool for bashing the Germans with. In the US, defendants are more than keen to file a re-exam at the USPTO in the face of a pending infringement action, making the most of the varying standard required for determining patent validity. Both the US and Germany have bifurcated proceedings and seem to be able to manage the "problems" this causes.

MaxDrei said...

Will somebody please call Nestle, whose Prometheus business just went down in flames at the Supreme Court of the USA. Perhaps Nestle can help the politicians of Europe to grasp how disastrous it would be for patent law in Europe to be set by the CJEU.

As to bifurcation in Germany, it works well enough German on German (or German on Asian). It does not work well when Anglo-Saxon parties are involved. Let the Asians litigate in Germany and the Americans in England, and let each go to Holland when it is best. Let those jurisdictions vie with each other for the business. I can't think of anything that will improve justice faster, in patent disputes in Europe. We are getting there slowly: don't spoil it.

Pay-Tent said...

Of course, also European patents can now be "bifurcated" to a national court and to the EPO opposition division

Anonymous said...

The problem with the bifurcated approach is that you can be on the receiving end of an injunction when the validity of the patent in suit has not been tested properly.

In the US, defendants may request re-exams in parallel, but they are still (to my knowledge) permitted to raise invalidity challenges directly in defence of an infringement action. (A US lawyer may correct me on this, however.)

Where German bifurcation currently has the worst effect is in the context of multi-jurisdictional electronics cases, particularly in the 'smartphone wars'.

If one company is successful in getting an injunction granted against a competitor in Germany which would have the effect of shutting down its German service until the validity of the patent can be determined by either the Federal Patent Court or the EPO (German validity actions are stayed where an EPO opposition in underway), which may take several years, the company on the receiving end of the injunction inevitably has to either enter into a settlement under coercion or produce a 'work-around'. Given the bargaining power of someone who has been granted an injunction, the injunction may be leveraged into gaining a favourable settlement across all international jurisdictions. In the electronics sphere, unlike in the pharma world, it is completely unreasonable for a manufacturer to try and 'clear the way' before launching a product, due to the sheer number of patents which may potentially be asserted against any new product.

This would be fine if electronics patents granted by the EPO were all of a high standard. Unfortunately they are not. To date, only one electronics patent has been found both valid and infringed by the English Patents Court. The validity of most of these patents would, however, go completely unchallenged by the German infringement courts. Under a bifurcated system, dodgy patents can be asserted pretty much with impunity, and the patentee gets a 'free hit' against a defendant. Conversely, where invalidity can be raised in defence (such as in England), many patentees would not even bother to raise an action in the first place, as the chances of successfully emerging from litigation with your patent intact and with a finding of infringement are reduced.

People often say "if the bifurcated system is so bad, why do so many people choose to litigate in Germany?" The answer to this is simple; if you are a patentee and you can obtain an injunction without any risk of having your patent found invalid, of course you are going to choose to litigate in Germany.

MaxDrei said...

Well said that commenter, especially the last sentence. It should be no surprise to anybody, why Germany is such a popular venue for holders of duly issued patent claims. With an injunction, you effectively win the game, and put the other fellow out of business, even if years later the asserted claim turns out never to have been valid. Being out of business, he's not going to be hounding you for compensation for the wrongly issued injunction, so it won't make any difference upping the quantum of compensatory damages if the injunction was wrong. Of course, the German folk memory is of the DPMA issuing only patents of cast iron validity but even with the dodgy stuff issuing from the EPO there is still this mantra about the validity of duly examined rights and the fundamental logic of the bifurcated system (which hides a reluctance to change anything, and a reluctance to admit that the bifurcated system is actually unfair, and not conducive to promoting the progress of useful arts).

Everybody planning a market launch in Germany should make themselves aware of the Schutzschrift system. Before you launch, drop a line to each of the district courts dotted around Germany that handle patent infringement actions. Good practice for China.

Pay-Tent said...

@Anonymous 1:44

Is then the feared UPCA-style bifurcation different from the German-style bifurcation?

If yes, would the UPCA cancel the risk of the "free hit" mentioned by you, even in a German local division of the unified patent court?

Anonymous said...

The real problem with European patents is the slowness of the system. More rapid examination, appeal and opposition proceedings at the EPO would address the interests of patentees and third parties more than anything.

Just because the politicians have been working on the unitary patent for decades does not mean they have or ever will produce anything other than an overly-bureaucratic and expensive dogs breakfast.

I am happy to see it die a quick and painful death.

I don't like bifurcation either.

Anonymous said...

If you get rid of the bifurcated court system, there is no need for an in-depth examination of the application. Have a simple search and registration system. Any bad patents are identified during the litigation proceedings and the patentee pays the cost.

MaxDrei said...

Anon writes: The real problem with European patents is the slowness of the system.

But can that be right? In the file on my desk is an EPO Board of Appeal case that I am watching. It is moving very fast because, just a few weeks ago, the infringement court in Italy asked the Board to get a move on. It has done.

Moral: if you don't ask, you don't get. Ask and you might be surprised.

Anonymous said...

And if everyone asks?

MaxDrei said...

Should that ever happen, we will find out, won't we.

Anonymous said...

May I ask on behalf of everyone else? Or, can I at least ask for examination to be speeded up on 3rd party applications of interest to me?

MaxDrei said...

You are free to ask. But the EPO is free too, to give each ask the weight it thinks appropriate. If your ask is more persuasive than the ask from the judge handling an infringement action, then it will be even more effective then, won't it.

Anonymous said...

Will somebody please call Nestle, whose Prometheus business just went down in flames at the Supreme Court of the USA. Perhaps Nestle can help the politicians of Europe to grasp how disastrous it would be for patent law in Europe to be set by the CJEU.

Or perhaps somebody should call the Mayo Clinic, whose work was compromised by Prometheus' patent (which, for different reasons, would never have been held valid in Europe, anyway). There are always at least two sides to any litigation, and there are very good arguments of principle that patent law, like any other aspect of the law, should never be allowed to detach itself entirely from the rest of the legal system. And while some of our American cousins may be extremely critical of this particular Supreme Court decision, you'll find very little backing in the US legal profession, never mind the population at large, for taking patents out of the purview of the Supreme Court.

I am personally convinced by the arguments of Prof. Tilmann, which for some reason have found extremely little echo in this blog, regarding how Art. 118 TFEU makes it unavoidable to have Arts. 6-9, or equivalent provisions, within the Unitary Patent Regulation. I am also less than impressed by how some of the critics of the proposed regulation attack the competence of the CJEU judges and indeed the EU as a whole.

MaxDrei said...

I had thought that it was the CJEU jurisprudence in the area of registered trademark law that was hitherto the best illustration of what might happen if it were also to be the supreme court in Europe for patent law. By contrast, the jurisprudence of the EPO is clear and ever clearer, a guiding light for the supreme courts of all EPC Member States.

I wonder, does that anonymous disagree i) on trademark law or ii) on patent law?

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