Fordham 27 (Report 10): Patent Potpurri

As the name suggests, the session on "Patent Potpourri" at the Fordham IP Conference provided an opportunity for speakers to highlight a mixture of topics that have recently attracted attention in the land of patents. Among the topics addressed were exhaustion of rights, the patentability of plants, cross-border liability for patent infringement, the doctrine of equivalents, subject matter eligibility and the bifurcated system of Germany. This session was moderated by Adam Mossoff (Antonin Scalia Law School) and the IPKat's Fordham guest Kat, Alexander de Leeuw (Brinkhof) reports on the session.

Over to Alexander:

"Myles Jelf (Bristows) spoke about international patent exhaustion. He expressed concerns regarding the fact that we have different systems globally addressing exhaustion, calling this “a rather toxic mix.” Myles explained how the checks and balances of one system can cause problems in other systems, also briefly touching upon the role of competition law. His analysis brought him to conclude that “the philosophical clash between how the U.S. and EU jurisdictions are dealing with post-sale restrictions means that, while each system is logically coherent in its own right, when combined as a result of needs of a global business each undermines the other, leaving businesses with a real headache.”

Aloys Hüttermann (Michalski Hüttermann & Partner) then moved on to discuss the recent T 1063/18 decision in which the TBA decided that plants exclusively obtained by biological processes can be patentable.  Aloys addressed the difficult political implications of this decision, leaving it unclear whether next steps should be expected from the Enlarged Board of Appeal (there was a recent referral by the EPO president, from the Administrative Council (which could amend Art. 53 EPC regarding the exceptions to patentability), from the European Commission (which could give guidance on the Biotech Directive), or from the EPC Member States (who according to Aloys appear to be unhappy with the decision). Aloys regarded T 1063/18 to be “a very interesting decision because it is about who has the final say in what.” He personally hopes that the referral by president will be accepted.

Tobias Hahn (Hoyng Rokh Monegier) discussed liability in Germany for infringement occurring abroad. Tobias explained that even if someone does not act within the borders of Germany, if upon the time of the foreign sale there is knowledge of the patent and the country of destination (i.e. Germany), there can be infringement under German patent law. Tobias further explained that “specific indications of infringement in Germany are necessary”, such as large quantities ordered or an obvious correlation between an order and action on the German market. He described this as some sort of negligence that may already suffice for liability under German patent law. As a strategy for patent holders Tobias suggested to always “send a letter informing an allegedly infringing foreign supplier about the patent, the infringement and the delivery routes of the recipient, as this creates the required knowledge”.

Responding to a question from Tobias Bremi (Swiss Federal Patents Court), Tobias Hahn indicated that “once you have been made aware you are within contributory infringement, there is no way out of it.” Klaus Grabinski (Federal Court of Justice, Karlsruhe) added that “as soon as you are aware of sales in Germany you have to stop supplying to the intermediary. You were not liable before, but you are from moment of knowledge. It is as easy as that.” This raised some concerns among the conference attendees as this intervenes with international commercial relationships and has an impact on competition beyond the question of infringement under German patent law.

Justin Watts (WilmerHale) provided a presentation on the doctrine of equivalents. This focused on the three-step test of the Eli Lilly v Actavis UK Supreme Court decision and the subsequent UK cases applying that  test. Justin argued that the test for equivalence impacts advise on freedom to operate, which is now much harder to give. According to Justin, “whenever you look at a design-around it is almost impossible to think how a design around is free of any infringement risk. Obviously it is trying to achieve substantially the same result in substantially the same way.” Justin finished his presentation with the remark that the United Kingdom now might internationally have the broadest infringement doctrine.

Another topic that was hotly debated during this year’s conference was subject matter eligibility (also known as the Section 101 or Art. 52(2) exclusion). Suzanne Michel (Google) explored the suitability of the current U.S. eligibility requirements for high-tech companies. According to Suzanne there is “no evidence that this test is hurting the software industry”, indicating that in fact R&D investment has seen an upward trend over the past years. The main objection to current eligibility requirements appears to be “that a lawyer cannot predict with certainty what the outcome will be.” This was dealt with swiftly by Suzanne: “Unpredictability? Welcome to the legal profession. The problem is not the test itself; it is the difficult cases litigated. The easy cases don’t make it to court. The situation always looks worse than it really is.” The central question posed by Suzanne was: if you accept that Section 101 has to be some kind of filter, what should it be? In other words, “what is technology, what is not technology, and where do we want to draw the line?” Shlomo Cohen (Dr. Shlomo Cohen & Co.) argued that “this is a very delicate balancing game of costs and benefits, that is being performed without the underlying data” resulting in a situation where “we don’t really know what the final impact of our decisions will be.”

The session ended with a discussion of the bifurcated patent system in Germany, which was present-ed by Heinz Goddar (Boehmert & Boehmert). Breaking the ice quickly with the introductory remark that “although there is a lot of patent litigation in Germany (80% of all EU patent litigation), we are not any more litigious than in 1945”, Heinz continued to explain that there is compulsory/automatic bifurcation for patent cases. Infringement proceedings and nullity proceedings are dealt with separately. It is possible for infringement proceedings to be stayed when nullity proceedings are commenced, but in most cases (about 90% according to Heinz) the infringement proceedings simply continue, resulting in fast proceedings with immediately enforceable injunctions. The nullity proceedings take significantly longer than the infringement proceedings, leading to a gap period in which patentees can rely on an injunction to achieve payment/settlement. “Why do people go to Germany? Because of this blackmailing opportunity.” As a potential solution to this arguably undesirable situation, Heinz proposed to “accelerate proceedings at the Federal Patent Court, for example by requiring an early qualified opinion of the court, well before the oral proceedings.” According to Heinz “If anything comes out of the present patent discussions in Germany, it will be this change in procedure.”

Cordula Schumacher (Arnold Ruess, Düsseldorf) commented from the audience that she did not agree with Heinz that the bifurcated system was the main reason why Germany is such a popular jurisdiction for patent litigation.  In her view the primary reasons are the quality of the judges, the absence of discovery and the reduced costs of litigating there.

Joachim Feldges (Allen & Overy LLP, Germany) added that the current situation in Germany is that a party will get a decision on infringement a full year before a hearing on validity.  In his view this is a constitutional issue and needs to be fixed, adding “there is a reason why Germany did not push for its system to be used in the UPC and this is it”.  Jürgen Dressel (ex- Novartis Pharma AG) further commented that of course there is the further issue in Germany that invalidity proceedings cannot even be commenced whilst EPO opposition proceeding are ongoing.