Trolls? We won't have no stinkin' trolls!: Commission "fails to see" the UPC's problem with trolls



Marc Tarabella, a friendly-looking
slayer of trolls?

On 24 October 2013, Marc Tarabella, a Belgian politician and Member of the European Parliament quietly prepared a question to the Commission on the issue of patent trolls and the potential door that the new unified patent system may leave open for them to creep in. Mr. Tarabella's question was thus:

"Are ‘patent trolls’ soon to arrive in Europe en masse? These companies, which are very active in the United States, make money by buying up patents with the sole aim of taking anyone who infringes them to court. ‘Patent trolls’ thus make no commercial use of the patents they own; rather, they use them purely as a way of pressuring other companies into giving them money.

For now, ‘patent trolls’ are largely an American problem. However, the new EU legislation on patents could change that.

1. How is the Commission preparing for this legislation?

2. Does it have concerns that the law will be abused?

Intellectual property cases may be dealt with by two courts: one focuses on the validity of the patent, while the other establishes whether the patent has been infringed or not. As both courts work independently of each other, a product may be preventively taken off the market before the issue of the patent’s validity has been resolved. What is more, this could happen in at least 13 Member States, once the single patent becomes a reality.

3. In view of the major impact such a ban would have, would this not enable plaintiffs to extract considerable sums of money on the basis of poor-quality or even invalid patents?"

All very reasonable, you may be thinking.

Commissioner Barnier

So, in what must be "real-time" in European politics terms, two months later a response comes from Commissioner Barnier (Commissioner for the Internal Market) almost as quietly as the initial question (thanks to Jason Rix of Allen & Overy for alerting the AmeriKat to the response) who replies:

"The Commission fails to see how the recent Union legislation on patents, namely Regulations 1257/2012 and 1260/2012, could increase the activity of so called ‘patent trolls’ in Europe. To the extent that the Honourable Member's question pertains to the Unified Patent Court (UPC), it should be noted that the UPC agreement is an instrument under international law and is not part of Union law. The matter is thus outside the Commission's remit. The Commission will, however, provide the following factual information.

The UPC as a common specialized patent court will increase legal certainty, and a centralized patent revocation procedure will leave less room for ‘patent trolls’ to exploit current fragmentation.

The UPC Agreement provides for safeguards against ‘patent trolls’. No automatic injunctions shall be granted: the UPC has the discretion to weigh the parties’ interests and to take into account the potential harm from the grant/refusal of the injunction. The Rules of Procedure (draft of 25 June 2013) foresee a possibility to require reasonable evidence that the patent is valid and being infringed and to order an adequate security for any injury likely to be caused to the alleged infringer if the injunction is later revoked.

The UPC is a single court competent for both patent infringement and revocation actions. A local/regional division has only a possibility, after having heard the parties, to refer a counterclaim for revocation to the central division. The Rules of Procedure provide that in case of a high probability that the patent will be held invalid in the revocation procedure the court must stay the infringement proceedings. The objective is to ensure that the patent validity is dealt with before the infringement action can proceed. "

There is something incredibly jarring about the tone of the opening paragraph that divorces the Commission's involvement with the proposals. Yes, the Unified Patent Court Agreement is an international instrument which the European Union is not a signatory, but it was the European Commission who was at the helm during the 2012 and 2013's negotiations on the entire package. It was the same Commission and other members of EU organs who sat through long nights of debate on the wording and provisions of the two Regulations and Agreement (the latter of which would form the basis of the Rules of Procedure that the Commission is now divorcing itself from)(see the AmeriKat's summary of the negotiations here here) .

It was, also of course, the same Commissioner Barnier who back in December 2011 referred to the unitary package as a "symbolic project" which he submitted in the "hope that we will reach a result that is line with the European economy." It is also the same Commissioner Barnier who as recently as December 2013 when European ministers agreed on the changes to the Brussels I Regulation (and here) , said that the agreement was another "decisive step" towards

"...the Unitary Patent package becoming a reality, and the Unified Patent Court ensuring much greater consistency in the way patent litigation is conducted in the EU. This shows that the single market is progressing and serving innovation and ultimately for growth and jobs."

So a blanket "we fail to see what your problem is and in any event the UPC Agreement wasn't us" is disturbing (although probably not unexpected). As to the substantive reasons why the Rules are adequate safegaurds, the AmeriKat refers to you the industry open letter and the accompanying AmeriKat article cited below and found here as to why they are not.

Readers may also recall that one of the main reasons for promoting this package was because, in the words of the Commissioner (see press release here):

"Europe is falling behind the US and China in number of patents granted. The new rules, once in place, will increase the potential for inventions and innovation within the European Single Market and reassert Europe's competitiveness".



The signed Unified Patent Court Agreement

It is not the number of patents being granted that concerns US litigants right now, its who is enforcing them - concerns recently expressed in an open letter by an industry coalition including Microsoft, Intel, Google, Samsung and Apple.

With patent litigation reform swinging its way through the halls of government in DC and the Court of Appeals for the Federal Circuit raising the welcoming presence of fee-shifting (see the AmeriKat's post here), the climate in the US is focused on closing the gaps that make it a troll's paradise.

On Monday, New York's attorney general, Eric Scheniderman, reached a civil settlement with MPHJ Technology Investments LLC which calls for new guidelines to ensure that patent assertion entities (PAE) do not abuse the litigation system by vaguely threatening with no specificity as to what claims of their patents they say are infringed or by failing to disclose their actual identity. The Wall Street Journal and Reuters report that

"The settlement requires MPHJ to reveal its true identity to targets, describe with "reasonable specificity" its claims, and have a good faith basis for claiming infringements."

Attorney-General Schneiderman states that

"The guidelines established in today's settlement will put an end to some of the most abusive tactics by placing the industry on notice that these deceptive practices will not be tolerated in New York."

With all this going on in the US, should now not be the time that the Commission, the legislative powers that be and those tasked with finalizing/implementing the Rules of Procedure (or providing rules for their interpretation) face-up to the potential gaps in the system (a system that is inevitably here to stay)? Or will we just wait until Commissioner Barnier's vision of a US style system in Europe is a reality?

"You are such a pollyanna, AmeriKat!" sneers Merpel, "The ship has sailed. The Rules of Procedure are essentially finalized and they all stem from the Agreement itself. Are you planning to amend the Agreement?!". Her tone aside, Merpel's points are well-taken and a reality that the AmeriKat is already well-versed in, but she won't give up. Perhaps, she contemplates, this is one area we should follow the stylings of our American cousins and start some lobbying (see recent news of industry hiring lobbyists in respect of the patent litigation reform bill here and here), and then, perhaps, the Commission won't "fail to see" the problem anymore...