Fordham 2016: Outstanding patent issues - the UPC, dual-track systems and Alice v CLS Bank

With everyone feeling suitably optimistic about the future of copyright and trade mark law, are patent lawyers feeling equally jolly?  Well....not quite.  There seems to be more problems to resolve following reform in the US and Europe, as the AmeriKat reports:  

Margot Frohlinger
Margot Fröhlinger (Principal Director, Patent Law and Multilateral Affairs, EPO) was the first to take the podium to discuss outstanding issues about the unitary patent.  Next year, Margot explained, we will hopefully have a unitary patent and a Unified Patent Court (UPC) in Europe.  This means a one-stop shop for post-grant procedure for protection and enforcement.  This will help remove the complexity of a fragmented market, but there are other issues that need to be addressed - some which are quite tedious and which need to be dealt with by agreement by Participating Member States or dealt with by the UPC.  The first issue is in relation to Unitary Supplementary Protection Certificates (i.e. SPCs based on unitary patents).  The European Commission has recently announced that they are going to create a unitary SPC.  Margot wishes them good luck.  The creation of a unitary SPC may be as complicated as the UPC (which took 40 years).  There are number of legal and political issues - i.e. creating a European unitary title that only has effect in some EU Member States?  Who is going to grant unitary SPCs and fix the fees?  Who is going to get the fees for unitary SPCs?  At the moment SPC fees are retained by national offices.  It will be difficult to create, but pending the creation of a unitary SPC, national SPCs can be obtained on the basis of the unitary patent.  The EU Commission will be clearly stating this.  The second issue is what happens if request for unitary effect is rejected by the EPO or is overruled by the UPC at the time when the validation deadlines has already expired.  Member States mainly agree that they should reopen the deadline for national validations.  This has been implemented in Sweden, Finland, Netherlands and Germany.  The UK considers that the patent holder should just pay the national renewal fees (and would be protected).  A harmonized approach on this point may be difficult.  The third difficulty is where prior national rights lead to a limitation or revocation of the patent for the territory of one of the participating Member States after the registration of unitary effect.  There are different solutions - either revocation or limitation of the unitary effect only for the territory of the Member State concerned, or revocation or limitation of the entire unitary effect and reopening of the deadline for national validations or loss of the entire Patent.  The UPC may have to deal with this issue as well.  The final issue is the double protection for the same invention by Unitary Patents and national patents.  There is no prohibition under the European Patent Convention.  This is left to Member States.  Member States have different approaches - some allow double protection, others prohibit it.  German law which traditionally prohibits double protection has now provided for double protection in their new draft legislation.  This adds another layer of complexity and may impact the opt-out strategies of patentees.  In conclusion, Margot says we should not compare the UPC and unitary patent with what an ideal world may look like - it needs to be compared with what the fragmented system is like now.  The UPC and unitary patent is an improvement.

John Alty
Always smiling, John has been
working hard on patent harmonization
John Alty (Chief Executive and Comptroller general, UK IPO) started his presentation with a baseball analogy.  Popular in the US and Japan - there are essential elements in baseball that are common (baseball bats, mounds, bases), but there are slightly different rules . This is like the patent landscape where you have to understand slightly different rules in numerous jurisdictions which can be challenging for SMEs.  There should only be one system across the world, that may be agreed, but no one is in agreement as to what system this should be.  Group B+ is working on this in relation to four key topics:  grace periods, publication of applications, treatment of conflicting applications and prior user rights.  Starting by negotiating legal texts will not get us very far.  We need to step back and look at the objectives of the global patent system when it comes to harmonization.  In particular, solutions need to be coherent and balanced, provide legal certainty, promote high quality patents and support economic growth. As a result of this framework and the B+ Group's work on the four key topics, patent harmonization is now closer than ever.

Judge O'Malley  - a fan of the skill of IP litigators
Judge Kathleen O'Malley (US Court of Appeals for the Federal Circuit) stated that the CAFC came into being because there were so many regional circuits  - some patent friendly, some not - leading to a diversity of decisions.  The CAFC was therefore established to ensure that if a patent was found invalid/valid, it was held to be invalid/valid across the US.  In 2015, the CAFC entered appeals from district court cases in over 600 cases, with 6000 patent cases being brought before the district courts.  Now patent cases account for 60% of the CAFC's case load, but Judge O'Malley also reminded the audience that the CAFC has wider jurisdiction than just patent issues.  A significant change she has noted is the increase in the number of cases brought by patent owners who do not practice invention.  This change created a huge impact in the patent litigation game.  In particular, Judge O'Malley commented that big laws firms (with big fees), rather than boutique law firms, are increasingly representing parties in patent cases because the stakes have become so much greater.  This has led to a change in how patent cases are being tried.  This is because larger firms have litigation teams who are used to trying cases in a variety of subject matters in numerous different district courts.  They are also not unaccustomed to taking cases to the Supreme Court (and they know how to get leave to do so).  She is now seeing patent lawyers, who are technically skilled, adopting savvy litigation styles and advocacy in order to effectively explain the technology to the court. To obvious applause, Judge O'Malley noted that IP litigators are some of the best litigators that she has seen in court.

Judge O'Malley also commented that the Supreme Court is increasingly taking an active interest in the CAFC given its important role which has been borne out by the numbers.  For example, in the past 6 years the CAFC has had 47 cases go to the Supreme Court, 32 of which are patent cases.  The Supreme Court is weighing in on really complex issues in relation to section 101  - patentable subject matter.  However, in response from a question from Hugh, Judge O'Malley noted that she is not a "huge fan of the Supreme Court's patent jurisprudence", especially when she sees a unanimous decision as that is indicative of a court that is not really delving into the patent issues, as necessary.  Judge O'Malley stated that she likes the ways in which the Supreme Court has dealt with some issues, for example in relation to civil procedure and jurisdiction. But, she stated, when it came to patent law "they have created more problems than what they have resolved".

David Kappos - not a fan of the Supreme Court's
decisions on section 101
David Kappos (Cravath, Swain & Moore) said that he is concerned about the IP system in general, because it is really quite clear that there has been major incursions made in the US and elsewhere that have diminished the strength of the applicability and vitality of the IP system (not just just patent law).  The Second Circuit seem to be delivering copyright decisions which are frankly bizarre (see the recent Instagram decision).  What is needed is a new direction for the country.  The election cycle will set in motion a new season of change.  David set out ten modest improvements that the next administration can implement quickly which are all business oriented.  The list focused on the leadership that the new administration needs to bring to the table to emphasize a policy at which innovation is at its heart, with the US resuming its role as the world's leader of innovation (but not ignoring the need for great innovation coming elsewhere).  David also said that the federal government needs to take a lead in championing and rewarding US innovation, which requires recognizing that innovation is difficult and risk and incentives are needed.  The patent system is our system for incentivization (anti-trust does not do it, no matter what they say) and the focus must be orientated towards IP, not other bodies of law.  

In terms of Supreme Court decisions, especially the CLS v Alice Bank decision, David said that it is impossible to make sense of the Supreme Court jurisprudence on section 101.  In trying to make sense of section 101, the PTO is trapped by a set of Supreme Court decisions which are incomprehensible.  That is has been the architect of PTO's real struggle to get to grips with patentable subject matter.   Judge O'Malley agreed that it is difficult to understand what is and is not left in terms of patentable subject matter, but this challenge has led to many more creative arguments from lawyers who try to distinguish their inventions from the realm of a CLS  v Alice Bank situation.  Sir Robin chimed in stating that in the real world the patent office does issue bad patents - it is inevitable  This is because its a one-sided examination process conducted by an examiner who may not have all of the prior art before him or her and who is generally under-resourced.  You can see this in Europe where an opposition takes 10-15 years to decide whether a patent is valid.  This is a broken system.  The America Invents Act, to Sir Robin, looks great in comparison as it provides a quicker, more efficient regime to address validity.  It also provides certainty, which is hugely important.
David agreed about the inevitably of some patents being wrongly granted.  In particular, this is an issue when an examiner is being asked whether an invention is abstract - that very question is entirely subjective and, as Sir Robin noted, in such a situation of course wrongly granted patents will be inevitable.

Sir Robin envisaging the end of EPO oppositions in favor
of Central Division revocations
"I would not want to be a patent owner, given there are so many ways to be attacked", continued Judge O'Malley.  In particular she noted the problem of patentees facing "serial inter partes reviews (IPRs)."  For example, if a lawsuit is subsequently dismissed or via a time-barred opponent latching on to an IPR brought by a venture capitalist who does not need to show standing. There is no certainty as to when a patent will be held valid or invalid, which devalues the property right.  Even if you get a positive result in one forum, she noted, its impossible to know whether your property right is solid enough to be able to invest into it.  The US patent system currently does not really address the problems that are caused with these different tracks in place.

Picking up on this point, the AmeriKat posed a question to the panel:  Given the problems of this dual-track system - in the US, between the district courts and the USPTO IPR and, in Europe, national courts and EPO oppositions - what is the solution?  In Europe, a national court may have held a patent to be valid and infringed only for the patent, many years later to be held invalid by virtue of an EPO opposition decision.  This issue will come up in the UPC and we should be looking for a solution now.  What is the answer?   Judge O'Malley stated that what is needed is knowing when there is a final decision.  This needs to be clear, but that under US law this may be an issue which needs to go to the Supreme Court to resolve.  David Kappos stated that clever litigants will find ways to game a dual-track system.  When the AIA was put together, David stated that a "safety valve was put in place whereby the USPTO could decline to institute an IPR.  However this safety valve needs to be used more", especially when a litigant has had their day in court.  Another solution, would be by way of legislative fixes to address the unintended consequences of the dual-track system.  Sir Robin stated that the solution, with respect of the UPC, would be to forget EPO oppositions and to commence revocation actions before the Central Division of the UPC.  Indeed, he foresees litigants using this venue more than EPO oppositions in the future.
Fordham 2016: Outstanding patent issues - the UPC, dual-track systems and Alice v CLS Bank Fordham 2016:  Outstanding patent issues - the UPC, dual-track systems and Alice v CLS Bank Reviewed by Annsley Merelle Ward on Thursday, March 31, 2016 Rating: 5


  1. The Cat that Walks by HimselfThursday 31 March 2016 at 19:41:00 GMT+1

    RE: Sir Robin envisaging the end of EPO oppositions in favor
    of Central Division revocations

    May I take this challenge and suggest the return to the EPO opposition procedure in 5-6 years after the active use of the Central Division path.

    Some reasons:

    (1) It seems that US went through this way and now is at "renaissance" of a patent office path for validity challenges.
    (2) The comparison between the EPO opposition rules of 2000 and the UPC revocation rules of 2012-2016 is somewhat unequal competition.

  2. Sir Robin imagines less use of opposition at the EPO, once the UPC is up and running.

    Well, of course! A no-brainer, one might venture. Ever since the EPO started, in 1978, 70% of all oppositions have been filed by German speakers, all because of bifurcation in Germany of the issues of infringement and validity. Why bifurcation? The German basic law (Constitution) makes it unavoidable, right? But now? The UPC is going to sweep all that nonsense away, isn't it.

  3. Yeah right. Opponents are going to abandon a low cost opposition for a high cost (with liability for costs) UPC. Both tracks will be used, and the added punch of a unitary patent will make opposition more compelling.

  4. As ever, shrewd comment from Meldrew. Accepting that the unitary patent adds "punch", what should be the business-like response of those going in fear of being punched, those who have seen the fist and fear its being used?

    In Germany, up to now, it was to get their retaliation in first, and oppose whereas, in England, it was not. I venture to suggest that in England it made more sense, most of the time, to get one's defence well organised but then wait for an attack which, mostly, would not happen. After all, litigation is supposed to be a last resort, isn't it?

    And if it were to happen, that an attack comes, and one really is sued in the unitary court for infringement, one would counter-claim for invalidity, would one not, as well as arguing non-infringement, all in the same court, the same action.

    so, Meldrew, have times changed then, that you suppose pre-emptive opposition to be "compelling"?

    And how about the "poor man's opposition" namely filing at the EPO 3rd party observations on patentability? Hmmmmh, I doubt it. Why hasten the grant of the patent, with claims that enjoy a higher presumption of validity, claims paccking a greater "punch"?

  5. Until the UPC has a track record it will not be clear whether it will encourage or discourage the fraternal enmity that occurs in Germany, but it is not that issue that concerns me.

    It is the dramatically increased value of a European patent that will make it a more tempting target.

    It is still possible at present to make a good living by selling products outside the holy trinity of DE-FR-GB and ignoring patents validated only in those countries. If the UP gets a big take up this option will decrease and there will be more people wanting to clear the path. To me this is very likely to result in an increase in oppositions.

    As for 3POs, I use these a lot. My clients prefer early certainty to prolonged uncertainty, and would rather their competitors had strong patents my clients do not infringe, than uncertain patents my clients might infringe.

    Far from being a "poor man's opposition" 3POs are an essential part of an attorney's toolkit, and they do not preclude later opposition. Perhaps this is why the number of 3POs is reported to have increased dramatically in recent years. Another factor here is the use of pre issuance submissions in the US. As our friends across the pond grow more familiar with such tools I would expect them to be used more. Particularly as you can say things in a 3PO you cannot say in a pre issuance submission..

  6. From where I am sitting, EPO oppositions are going to continue, and are going to be the preferred option of weeding out bad patents. The speed of oppositions up to the OD is picking up, although the OD to TBA stretch is still too long. The, the EPO opposition route will remain cost effective compared to a UPC revocation action.

  7. I cannot see my clients routinely file revocations. It is partly a numbers game, and the official fee is just too high for that.

  8. Glad to be out of the madhouseFriday 1 April 2016 at 10:30:00 GMT+1

    Maybe Sir Robin was contributing his bit of Aprilfoolery before the due date? Unless the UPC starts systematically rejecting requests for stays of proceedings while oppositions are pending (and I don't expect that), oppositions will remain interesting for alleged infringers if only as a delaying tactic. Tactically, the only drawback of an opposition vs. UPC invalidation is that the EPO is notoriously circumspect around evidence of public prior use. If your best attacks depend on such evidence, you may be well advised to go directly to the UPC to invalidate that patent. Otherwise, I'd start with an opposition.

  9. Nice comments. Where do they leave us?

    Horses for courses? There are WO and A publications best dealt with using a 3PO, others where that course would be contra-indicated. Then there are those cases which are more or less crying out to be opposed at the EPO. And then there are cases where one would hesitate to make the first move but would pile in to an opposition at the EPO if the patent owner makes the first move.

    In short, every manufacturer ought to be actively keeping clear the path forward, by whatever means are best suited.

    So, plenty of work for any European patent attorney with enough business acumen to help such clients arrive at the optimal strategy. And every reason to be confident, going forward, that the EU's patent regime is fit, fair and economical, not only for patent owners but also for those bothered by patent owners.

  10. As much as I admire Sir Robin, I cannot make much sense of the suggestion that litigation at the UPC might effectively do away with the need for EPO oppositions.

    His suggestion may make sense for some litigants, but I doubt it will be all that many - at least not in the short term. This is because EPO oppositions will continue to make a great deal of sense for: (a) anyone seeking to knock out national validations in non-UPC countries (such as Spain); (b) those seeking to knock out opted-out EPs; (c) those of limited means who are seeking to "clear the path"; and (d) those with deeper pockets who want to play both systems.

    To my mind, the majority of litigants will probably fall into at least one of those categories. However, it remains to be seen whether the balance changes once users become more familiar with how the UPC operates.

    On that latter point, I suspect that the UPC will have a difficult time of it in the early years. This is because the legal system that the Court will need to apply simply has an astounding number of complexities and loopholes / gaps (and, arguably, is being improperly implemented by the Member States). In this respect, Ms Fröhlinger's comments (if reported correctly) are potentially quite revealing. That is, if sorting out legal complexities is viewed in high circles as being "tedious", it is no wonder that we are faced with a UPC system that currently looks to be half-baked at best.

  11. As a European Patent Office opposition needs to be filed within 9 months of grant, it is only a useful process if third parties have a potential commercial interest in the patent at that time. Clearly, this will be the case in many instances, but not all, and it is technology dependent.

  12. Sir Robin has in the past pointed out the potential consequences of extending the 9 month time limit for filing an EPO opposition. It seems that the existence of the time limit forces parties to file precautionary EPO oppositions which they might otherwise have chosen to delay. Analogously, the existence of the UPC route would make the precautionary opposition less necessary. Thus the number of opposition cases might drop.

  13. The Cat that Walks by HimselfSaturday 2 April 2016 at 16:49:00 GMT+1

    RE: Sir Robin has in the past pointed out the potential consequences of extending the 9 month time limit for filing an EPO opposition. It seems that the existence of the time limit forces parties to file precautionary EPO oppositions which they might otherwise have chosen to delay. Analogously, the existence of the UPC route would make the precautionary opposition less necessary. Thus the number of opposition cases might drop.

    There is no real need to extend a 9-month period for filing an opposition after the grant.

    However, it does make a lot of sense to allow a 6-12 month opposition period at the EPO in case a legal action (e.g. infringement) has been started at a national court of the UPC.

  14. Ode to the UPC

    Will you come gentle out of that dark night?
    Life is short and prospects hardly bright

    Forty years gestation, yes that’s right
    Appear to be concluding, though some fight

    To litigate piecemeal is shark’s delight
    They rage rage against the shining of the light

    Sir Robin thinks you wondrous and might
    Promote your revocations out of sight

    My opposition here is fairly slight
    Cheap you ain’t, and I am tight

    So close to birth and yet in plight
    Will Brexit wreck it?

  15. Might the UPC might make "precautionary" oppositions less necessary? Well, perhaps - though the influence that this factor will have on the number of oppositions will, at least in the short term, be limited by the fact that there will be significant markets (such as those of Spain and Poland) that will remain out of the system.

    On the other hand, one could argue that the rather high costs for filing a counterclaim of invalidity at the UPC might make competitors more inclined to file "precautionary" oppositions. And why not? An opposition gives you another bite of the cherry, adds relatively little to total litigation costs and deals with markets that the UPC cannot reach. What's not to like about that?

    This latter point emphasises the fact that the UPC and EPO oppositions need not be mutually exclusive. Each has its own pros and cons and will therefore be used (or not used) if it suits the needs of each individual litigant. Businesses therefore need both systems to be strong and effective. So I would say that it is about time to reverse what appears to have been a deliberate policy of under-staffing of the Technical Boards of Appeal.

  16. Well said, Proof. I expect the UPC mindset to be not a million miles away from that of the courts in Germany. So, if your story to the UPC, when the patent is asserted against you, is that the patent should never have issued, the court might ask why you never opposed it when you had the chance. It is not only The Lord who helps those who help themselves. If you cannot convince the EPO that the issued patent is too broad, why should you suppose you will fare any better at the UPC. Look what's happening now, in the USA. These days, if you want a US patent struck down, go and ask the USPTO to oblige. The USPTO is overwhelmed with petitions to revoke.

    Incidentally, I baulked at your word "policy" when it comes to the President of the EPO declining to present to the AC any names for filling the ever more numerous gaps in the staffing of the Boards of Appeal at the EPO. For all I know, he is doing it capriciously, in a fit of pique, because the AC still won't give him what he is demanding. I cannot understand why the AC goes for so long, negligently tolerating such nonsense from the President. Mere hand-wringing is not enough to deal with such a man. He (like any self-respecting CEO) just laughs at that.

  17. Proof of the pudding.

    I thoroughly agree with your approach.

    Having one's cake and eating it has always attracted me as a philosophy.


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