Does the injunction gap violate implementers' fair trial rights under the ECHR?

In jurisdictions with bifurcated patent systems, infringement claims and invalidity attacks are heard in separate proceedings, before different courts. Bifurcation is often defended on the grounds that the validity of the patent can be assessed by judges with technical expertise. Germany, Hungary and Austria each have bifurcated patent systems. A compromise position was adopted in Article 33(3) of the Agreement on a Unified Patent Court, whereby the division hearing an infringement claim may either refer invalidity claims to the central division or hear both claims with the assistance of a technically qualified judge.

Bifurcation, however, also has disadvantages, the most important of which is that remedies for infringement may be imposed on the basis of a patent that is later revoked by the court hearing the validity defence. This problem is colloquially known as the "injunction gap". A recent study by Henkel and Zischka [here] found that between 2010 and 2012, German courts fully invalidated 45% of patents and partially invalidated 33% more. And a study by Cremers et al [here] found that between 2000 and 2008, a patent was considered (partially) infringed and later (partially) invalidated in 41.3% of cases. These numbers suggest that in practice, the injunction gap is likely to lead to a nontrivial number of instances where remedies are imposed on the basis of invalid patents.

Unsurprisingly, the injunction gap has been the subject of much criticism. In the pending patent reform process in Germany, for instance, virtually all stakeholders expressed concerns over it [Katpost here, publicly available stakeholder positions here].

What is perhaps more surprising is that there have been no serious attempts to challenge the injunction gap on the ground that this system violates an infringer's right to a fair trial under Article 6 of the European Convention of Human Rights (ECHR). By way of lockdown therapy, this Kat has penned an analysis of this issue, with much help from his old colleague and pal Max Schellhorn. The article is forthcoming in GRUR International. Unfortunately, this journal's open access policy doesn't allow advance sharing of the manuscript, but a preview of the argument is provided in this post.

Some things just shouldn't be separated

The ECHR's requirement of a fair trial

Article 6 ECHR guarantees to everyone, in the determination of their civil rights and obligations, "a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law". The European Court of Human Rights (ECtHR) has held that Article 6 ECHR means, among other things, that parties should be given "a reasonable opportunity to comment on all relevant aspects of the case" [App No. 33307/02, Galich v Russia, at 25].

In the context of patent infringement proceedings, there can hardly be any doubt that the validity of the asserted patent is a – if not the – "relevant aspect of the case". Indeed, some cases revolve almost entirely around a patent's validity while infringement is a given, as can occur in pharmaceutical- or Standard Essential Patent cases.

If the infringement court does not independently establish the patent's validity, it effectively relies on the patent office's grant decision. Under Article 6 ECHR, this is not problematic per se, so long as the grant decision can be challenged before a ECHR-compliant court [ECtHR, App No. 49429/99, Capital Bank v. Bulgaria, at 103-104]. Since the patent's validity may be challenged before the Federal Patent Court – which is no doubt ECHR-compliant – it may seem, at first glance, that the bifurcated patent system does not violate Article 6 ECHR.

Does the German system comply with the standard?

But first looks can deceive. In this Kat's view, there is a strong case that Germany's bifurcated system as it currently functions violates defendants' rights under Article 6 ECHR.

First, although the split proceedings may formally satisfy the requirements of Article 6 ECHR in that the defendant has a forum to challenge the patent's validity, the ECtHR also requires that procedural safeguards are "practical and effective" [App No. 33637/02, Ternovskis v. Latvia, at 66]. In particular, "the seriousness of what is at stake for the applicant will be of relevance for assessing the adequacy and fairness of the procedures" [App No. 13469/06, D.D. v. Lithuania, at 66]. And where subsequent proceedings are not capable of remedying procedural shortcomings due to changed factual circumstances, they may not be considered an adequate procedural safeguard within the meaning of Article 6 ECHR [App No 29278/16, Prebil v Slovenia, at 44]

In other words, the defendant's formal ability to challenge a patent's validity may not suffice to safeguard their Article 6 ECHR-rights, if practically speaking this possibility offers little solace.

Because the consequences of patent infringement remedies – particularly, injunctive relief – can be both urgent and far-reaching, there is a real risk that the safeguard offered by patent invalidation proceedings before the Federal Patent Court is "illusory". There is a rich literature on the threat potential of patent injunctions [see e.g. the chapter by Siebrasse here]. Thus, the threat of an injunction may induce adjudged infringers to accept egregious settlement conditions. That is one thing if the court is convinced of the underlying patent's validity; it is quite another if that validity has not been examined by the court at all.

Second, there seems to be little justification for the system as it is. In particular, the average patent runs a high risk of turning out invalid. That is no doubt in line with readers' experience, but also e.g. with data from the European Patent Office, which reported that in 2018, only 32% of patents were upheld as granted in opposition [here]. The aforementioned study by Henkel and Zischka likewise suggests that less than half of patents is upheld as granted.

Given such high rates of invalidation, it goes quite far to impose remedies for infringement without first vetting the patent's validity. Changing this would mean that patentees are no longer guaranteed swift relief in Germany, where infringement proceedings on the merits on average take significantly less time than e.g. in the Netherlands or England. That, of course, is a drawback, but as stated the current system comes at the expense of the infringer's ability to proper defend themselves. In this Kat's view, the infringer's right to have a court hear its invalidity defense before infringement remedies are imposed clearly outweighs the patentee's interests in maintaining the status quo, even if it means they would have to wait longer for a decision in infringement suits.

The most appropriate solution: stay of proceedings

The article discusses the various safeguards that the German system currently offers to infringers. By and large, they seem inadequate and in any event they do nothing to restore the fundamental imbalance between parties to patent infringement proceedings.

In the German patent law reform process, the solution proposed is to require the Federal Patent Court to issue a so-called "qualified opinion" on the patent's validity within six months, which would normally be before the infringement proceedings are concluded. If that solution would work, it would go a long way of remedying the harm caused by the injunction gap. But doubts about the feasibility of this proposal have been expressed by many stakeholders, including by a former judge on the Federal Patent Court [here].

According to this Kat, a much simpler solution is available: the infringement court could stay the infringement proceedings – or the remedies it imposes – until the Federal Patent Court decides on the patent's validity, whenever the defendant can show that invalidation of the patent is more likely than not. In fact, the German Federal Supreme Court has ruled that they must do so when, in the original German, invalidation is überwiegend wahrscheinlich ("generally likely") [X ZR 61/13, Kurznachrichten, at 4]. In practice, however, it can be difficult to obtain a stay, particularly where the patent's validity is challenged on grounds other than a lack of novelty.

There is no reason to think that German infringement judges, which are among Europe's most experienced and well-regarded, could not make a preliminary assessment of a patent's validity before deciding on a stay. Their reluctance to do so may, as many have pointed out, be harmful to Germany's innovative climate insofar as it facilitates the injunction gap. It may also be a violation of the defendant's rights to a fair trial.

Does the injunction gap violate implementers' fair trial rights under the ECHR? Does the injunction gap violate implementers' fair trial rights under the ECHR? Reviewed by Léon Dijkman on Wednesday, December 16, 2020 Rating: 5

1 comment:

  1. maintenance as granted is not the same as invalidity (in full) - the actual statistics for invalidity (in full) are below 40% for granted EP and DE patents as far as known here

    In any event, it all depends on the specifics of the case at hand and the side that is seeking its right

    A lawfully entitled patentee should not be deprived of their rights either... (despite any shortcomings of the injunction gap)

    And yes experience shows German judges do grant a stay of the proceedings based on their own judgement ... (without preliminary opinion from the GFPC/BPatG


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