Chinese patentees turn increasingly to litigation

Via Greek IP lawyer Nikos Prentoulis comes this link to a short feature in The Economist, "Battle of ideas", which reports on the increasing extent to which Chinese companies have begun to enforce patents against foreign traders. This litigation boom is mainly occurring in China: 

"With the rush for patents has come an increase in disputes. Since 2006 more patent lawsuits have been filed in China than anywhere else, even litigious America. Most pit domestic firms against each other, but in recent years foreigners have found themselves on the receiving end too. In December Samsung, a South Korean conglomerate, was ordered to pay compensation to Holley, a Chinese telecoms firm. The recent victories and lucrative awards will open the floodgates to more suits, predicts Tony Chen of Jones Day, a law firm".

It may however soon be spreading to the US, where Chinese applicants were granted 1,225 patents last year.  Judging by the tenacious manner in which Chinese businesses have contested challenges to their Community designs, they will be formidable foes.

Qualcomm, Broadcom settle on terms

Law.com reports that Chip maker Qualcomm Inc. said late this weekend that it would pay Broadcom Corp. US$891 million over the next four years in a with prejudice settlement of their long-standing dispute over patents and royalties. The agreement terminates all litigation between the companies in the US and elsewhere, with Broadcom also withdrawing its complaints to the European Commission and the Korea Fair Trade Commission. The agreement also includes an element of cross-licensing.

In this complex litigation, Broadcom had alleged anticompetitive practices on the part of Qualcomm, which had already successfully resisted three consumer class-action suits alleging antitrust violations following accusations that it had failed to license its technology on fair terms.

This settlement looks like another of those complex agreements that the parties would have been highly unlikely to make if they had not been locked in litigation in the first place.

Affordable patent litigation and the Burdon Plan: some additional comments

The Burdon Plan, first launched on the IPKat weblog on 5 November last year, has been the subject of a good deal of discussion and further thought since then (see eg posts on PatLit here, here and here; critical response from Taylor Wessing's Gareth Morgan and Richard Price, here). In the following article, Michael Burdon develops his proposals in the light of the many responses he has received.  He writes: 

"The purpose of this note is to provide some additional comments on the ideas outlined in my earlier note, especially taking into account numerous communications and discussions I have had since its original publication, including discussions with industry bodies and professional organisations, such as the IPLA. I also appreciate that the Plan would require a change of rules in the light of Nichia v Argos and Knight v Beyond.

Key Points

The main assumption in my paper was that there was a substantial body of patent litigation which did not occur in the UK because companies could not afford it. This assumption is supported by my discussions. The problem of lack of access to justice lies not only with patent owners being unable to enforce their rights but also with companies which are forced to change their R&D and/or take licences when they do not consider the relevant patent to be valid but cannot afford to challenge it.

The crucial factor in deciding to litigate (after prospects of success) is the cost. There would be considerable more appetite for patent litigation in England if (1) it were cheaper and (2) the costs risk was more reliably predictable. The certainty of the maximum costs exposure at the outset is as important as the total amount. Litigants can negotiate some certainty about costs with their own chosen advisers, but the estimate and the assumptions on which costs are predicted or agreed often change because the course of litigation cannot be controlled or predicted. At present, it is almost impossible for one side to predict the likely exposure to the recoverable costs of the other side within a meaningful range.

The success of this proposal depends on there being a predetermined cap on the recovery of costs and the associated alternative cost-effective procedure which enables the cap to be met. These two related ideas provide the basis for assuring a litigant of the reliability and certainty of the overall costs exposure – not just one's own costs but especially the costs of the other side. The only way to deal reliably with the certainty of costs risk is to ensure that the recoverable costs of the other side are capped at a sensible fixed amount which is known before proceedings begin.

I have then sought to design a procedure which could be undertaken within that capped costs constraint. This procedure would then, in turn, enable the party commencing the litigation to agree a more certain costs position (perhaps on a fixed or capped costs basis), in advance, with its advisers. Advisers would be more readily able to do this if the procedure and time lines were clear, with minimal scope for variation. Time is critical to cost.

It would not achieve the objective to determine the costs cap after the litigation has been commenced. This involves too much uncertainty and risk as to future cost exposure. Industry feedback supports my belief. Such a provision would have little effect on providing access to justice in smaller cases. Companies will simply not take the risk of unquantified costs exposure.

The other main aspect of the proposal is to ensure procedural certainty and fairness. I do not consider it practical to prevent a party spending more than £100k on its case. However, any benefit obtained from the ability of one party to out-spend its rival should be restricted. The procedures and limits on the length of documents and submissions are designed to balance the parties' positions, irrespective of funding, as well as making the costs cap reasonable. While the precise details of the procedural steps under such a Plan might be different than that which I proposed, it is important that the procedure is clearly identified and restricted with these principles in mind.

As stated in the orginal proposal, the procedure should not be varied from case to case. Otherwise, it will affect the ability of the parties and their advisers to work within these costs constraints. There should seldom be a need for an application during the proceedings.

Certainty of costs exposure should be secured from the outset. This would enable a company considering litigation to budget for it and approve it on the basis of an ascertainable and reliable costs risk. It would be for the claimant to elect for the scheme to apply. There could be various safeguards built in, to ensure that the scheme would not be used inappropriately for more complex cases. For example the party commencing the case could certify it was appropriate; the issuing court could review the patent and perhaps a short one-page submission from the claimant as to why the scheme were appropriate before approving the application of the scheme. However, there may be occasions, on which a case may be removed from this scheme, especially by application of the Defendant; e.g. if it involved experiments.

I consider that these situations should be truly exceptional, but not impossible.  Therefore, as a safeguard to the party commencing the proceedings, I propose that if a case is removed from the scheme, the claimant be given a short time in which to withdraw its case (i) on a without prejudice basis and (ii) without any payment of costs to the defendant. The claimant would suffer no estoppel from having brought and withdrawn a case, nor would it suffer any risk of paying costs to the other side. I believe the claimant would need this safeguard in order to be encouraged to use the scheme. The defendant could not be prevented from commencing proceedings; e.g. in the High Court, after the claimant's withdrawal.

Additional Comments

The scheme I propose was always intended to be an alternative to mainstream patent litigation. It was not intended to be used for most of the cases currently heard by the Patents Court but could probably be used for most, if not all, cases heard by the Patents County Court. I initially proposed the scheme for use in the Patents County Court to allow a clear demarcation with the Patents Court and because it permits more flexible representation. However, there is no reason why it should not be used in the High Court. I did not anticipate that it would be used for complicated cases but the category of technology should not necessarily be a bar. For example, members of the BioIndustry Association (BIA) Intellectual Property Advisory Committee (IPAC), on which I sit, were very supportive of this scheme and did not want to be excluded from it. It might also be useful to introduce a system of Appointed Persons to hear these cases.

I proposed a novel procedure where the defendant's witnesses are cross-examined before the claimant's. On reflection, while I recommended the court time is limited and allocated equally between the parties, I suggest all cross-examination takes place on day 1 – shared equally with a maximum of 3 hours available to each party, perhaps after a short (30 minute) opening by the claimant with closing submissions on the second day (shared equally with a maximum of 3 hours each party, defendant first). The judge would pre-read the day before the trial and give judgment the day after trial.

I have received various suggestions that £100k, although a laudable objective, may be unrealistic and that recoverable costs should be capped at £150k (and index linked). The cap will apply to the total costs of all members of the relevant legal team (solicitors, barristers and patent attorneys), and the expert. It would include the costs of any counterclaim for invalidity or infringement.

I do not consider that any premium payable under a conditional fee agreement (CFA) should be recoverable from the losing party, especially if the total recovered would exceed the cap. However, that would not prevent a party agreeing a CFA with its adviser and paying a success fee. I also anticipate that the certainty of this scheme would make it easier, and more practical, to obtain insurance cover.

Some have commented that the position on costs recovery is unclear in my original paper. Time spent in detailed costs assessments and in arguing and negotiating costs is wasteful and disproportionate, especially with the amounts at stake under this scheme. I anticipate that the judge would make an overall assessment of costs recovery based on the issues on which both parties were successful. If, for example, the judge decided the winning party was successful overall on 65% of issues and had spent £100k, or more, on its legal advisers, then it would recover £65k without a detailed assessment. If it spent less than 100k, it would be entitled to recover 65% of its actual costs.

I have received suggestions that the remedies of the claimant should be restricted, and in particular injunctions and revocation should not be available. While I can see the force in having the remedies in cases brought under this scheme available only on an inter-parties basis, I can see problems in applying such limited relief in practice (e.g. to what extent should the outcome be transferable?) and compliance with international obligations.

Appeals on procedural points are difficult to envisage and should be exceptional (if at all). There should be corresponding limits on the length of substantive appeal documents, submissions and recoverable costs. The appeal should certainly take less than 1 day and recoverable costs should likewise be capped (e.g. 25% of the trial costs).

Tarceva case: Roche fined for "material suppression"

The excellent and informative Spicy IP blog today features this post by Shamnad Basheer "Breaking News: Roche Loses Tarceva Patent Case and Faces Hefty Fine": it explains the ruling of Appellate Bench of the Delhi High Court (Justice AP Shah and Justice Muralidhar) in favour of Cipla and against Roche in a high profile patent litigation involving Roche's patented drug Tarceva. PatLit focuses here on Shamnad's account of the fine:

"Interestingly, and perhaps very damagingly for Roche, the judge also imposed a cost of 5 lakhs (approximately USD 10,000) on Roche for suppressing material facts. The court appears to suggest that Roche had taken the patent office and the court for a ride by suppressing facts. Roche has around ninety days to appeal to the Supreme Court of India now. If not for anything else, it ought to appeal to reverse the finding that it suppressed material facts".

Since Shamnad did not have an opportunity to read the judgment in full before posting, we may expect more detail in his follow-up post. It would be good to know whether the fine was imposed under an inherent jurisdiction for contempt of court or under some specific statutory power under the Indian patent legislation. In either event, since India is becoming an increasingly important venue for patent actions, litigants should be aware of the risk incurred in taking what is seen as suppressive action. 

Earlier this week ("License to speed - but not to shred"), PatLit posted a note on the problems faced by Rambus in its US suit against Micron, having shredded materials that may also have had some bearing on the outcome of the case. There, no fine was imposed but the patent was ruled unenforceable. 

Taking account of foreign and EPO decisions

The May 2009 issue of 10-times-a-year journal Patent World contains the usual assortment of contentious, litigious and financial items from the world of monopoly-protected innovation. One such item is an article by Gregor König (König Szynka Tilmann von Renesse) on the ruling of the Bundesgerichtshof late last year that Eli Lilly's olanzapine patent was both novel and non-obvious. 

The article, which runs through the stages of the case and places it within the context of earlier decisions, observes that the highest German court, in reaching its decision, also took into account the decisions in parallel proceedings before the British courts and before the European Patent Office's Technical Boards of Appeal.  This serves as a reminder that, despite the considerable legal and procedural differences that still exist between jurisdictions around Europe, the substantive norms of patent law are shared and consistency between them in patent practice is an aim to which most courts now consciously aspire.

License to speed -- but not to shred

The most recent Intellectual Property Bulletin from Australian law firm Allens Arthur Robinson carries a usefully short summary by Sarah Matheson and Kelly Griffiths of the story so far in the saga of Micron Technology Inc. v Rambus Inc. This is a US action relating to the payment of royalties on patents which, thus far, Rambus ("Your license to speed") has not been able to enforce against Micron on the ground that the destruction of documents by Rambus rendered its patents unenforceable.

The plaintiff in these proceedings is actually Micron, which sought and obtained a declaratory ruling from the District Court of Delaware that, by intentionally destroying documents when litigation was reasonably foreseeable, Rambus knew, or should have known, that a general implementation of its document retention policy (sic) on certain "shred days" was inappropriate. Put simply, Rambus had failed in its duty to preserve potentially relevant evidence. In result of this conduct, which materially impugned the litigation process, Micron was materially prejudiced.
Rambus has appealed to the US Federal Court of Appeal. Meanwhile, other proceedings in Delaware and California in relation to similar facts involving Rambus and other parties have been stayed, pending the outcome of this appeal. The authors of this note add:

" ... Micron demonstrates the importance of considering the impact of any actual or anticipated litigation when formulating any document policies to ensure the preservation of potentially relevant documents".

This advice might seem obvious to patent attorneys, but shredding evidence makes perfect sense to the business community and the time to teach them good habits is long, long before litigation looms on the horizon.

An insight into Dutch costs

A good deal has already been said on the recent Dutch ruling in ratiopharm, Tiefenbacher and Centrafarm et al v Lundbeck (see earlier comments on the IPKat and The SPC Blog here and here). In this decision the Hague District Court, ruling on the validity of Lundbeck’s escitalopram patent (EP 066), held that all the claims were invalid for lack of inventive step. Now, courtesy of Daan de Lange (Brinkhof), PatLit has obtained a full English translation of the decision.

For obvious reasons the cost of patent litigation varies considerably between different European forums and there is no stable and predictable scale by which they can be confidently measured and compared against one another.  This does not stop litigants asking where litigation might cost them less, though.  The paragraph reproduced below, however, serves to give some guidance concerning what started out as three separate actions which came before the preliminary relief judge in April, May and June 2008 respectively, but which eventually coalesced:

"The costs of the proceedings on the part of Tiefenbacher and Centrafarm, fixed at €276,357.97 are not disputed. These will be allocated to the parties in equal shares. Lundbeck has disputed that the attorney’s fees presented by Ratiopharm in the amount of €427,346.58 are to be deemed 'reasonable and balanced'. The court shares Lundbeck's opinion that these costs, in comparison with the attorney’s fees claimed by Lundbeck and Tiefenbacher/Centrafarm (€291,691 and €126,155.80 respectively) appear to be too high and are not justified by the circumstance that it, contrary to the other parties, was not involved in foreign litigation. It has not appeared, after all, that the Dutch attorneys of the other parties were involved in such litigation, while moreover these proceedings included other experts and, in part, other positions than was the case in those foreign proceedings. The court will reasonably fix the attorney’s fees of Ratiopharm at an amount of €290,000, equal to the amount in attorney’s fees claimed by Lundbeck. The costs of patent attorneys and experts of Ratiopharm of €141,186.72 are not disputed and will therefore be awarded as claimed, so that of the costs claimed by Ratiopharm a total amount of €431,186.72 is eligible for allocation. As no independent arguments were presented in the counterclaim, all costs will be allocated under the principal action".

PatLit is curious to hear from its readers, in the light of experiences in their own jurisdictions, whether the Dutch award would rank as a bargain buy, a fair figure or an expensive deal in comparison.

Book review

Enforcement of Intellectual Property Rights in Dutch, English and German Civil Procedure, by George Cumming, Mirjam Freudenthal, Ruth Janal, addresses one of the questions posed more frequently by academics and bloggers than it is raised in court: what has been the real impact of EU Directive 2004/48 on the enforcement of intellectual property rights? The three authors of this tome, based respectively in Paris, Utrecht and Berlin, have completed a task not dissimilar to that which this reviewer commenced in 2005 but subsequently abandoned in favour of blogging: the construction of a systematic analysis of the IP Enforcement Directive within its immediate legal context. According to the publisher's (Kluwer's) web-blurb:

"The three authors’ vastly detailed, article-by-article analysis of the fortunes of Directive 2004/48 EC in three EU jurisdictions offers enormously valuable insights into the complex ways Member States respond to Community law, and in so doing provides an important addition to the ongoing inquiry into the nature of the reciprocal tensions between EU law (both judicial and legislative) and the laws of Member States.

The particular investigation undertaken here reveals three paradigmatic situations:

* the situation in which the Directive has not been implemented at all, either because the Member State believes that its current legislation is adequate or that the wording of the Directive is such that no special legislation is required (England);

* the situation in which implementation has been inadequate, because either the pre-existing legislation constitutes inadequate legislation or because the specifically adopted legislation proves to be legally uncertain (The Netherlands); and

* the situation in which the relevant time for implementation for the Directive has elapsed and no specific legislation has been adopted (Germany).

If there really is, as the European Commission contends, an ‘enforcement deficit’ in the protection of intellectual property rights by national rules of procedure, then the most effective remedial approach, Cummings shows, is through the principles of legal certainty, full effect, and effective judicial protection. These principles will assist the national court in interpretation of the precise meaning of the substantive obligations under the Directive. Drawing on the tenor of ECJ law that national procedural rules should not present an obstacle to adequate judicial protection, the author considers the conditions that must be fulfilled before an eventual claimant, who has suffered loss and damage caused by either the non-implementation or the incorrect implementation of a directive, may bring an action against the State for breach of Community law. ... ".

This is not at all the book that this reviewer planned to write, however. As the description suggests, it is at heart a jurisprudential work, addressing the relationship between the EU's legislative organs, the Member States and the Directive itself. Although the sincerely committed practitioner will find much of interest, particularly at the appellate level where the interpretation of implemented (or supposedly implemented) provisions of the Directive is the fulcrum around which litigation turns, this is not a "how to do it" manual for IP litigators. Written too early in the history of the implementation of the Directive to be able to analyse a large and indicative body of post-implementation cases, the book must draw on other sources -- which it does most effectively; this inevitably gives it the more fragrant aroma of the corridors of the legislature rather than the stench of contested infringement proceedings.

For the patent litigator there are discussions of such live issues as cost-capping, as well as reviews of other issues that apply across all IP rights. The text is well organised and retains the reader's attention. It also provides an excellent basis for getting to know the Directive, having the ability to introduce the intelligent reader to the topic while not in any sense being a beginner's-only read.

Bibliographic details: publisher Wolters Kluwer (October 2008), ISBNs 9041127267 and 13: 9789041127266. Hardcover, xiv + 317 pp. Website here.

Super-complainants: do they have a role in patent litigation?

The UK's Department for Business, Enterprise and Regulatory Reform (BERR) last month published a 17-page document, Super-complaints: Guidance for bodies seeking designation as super-complainants (here). The document does not contain any express reference to patents or any other intellectual property rights. However, the introduction explains that

"The Enterprise Act 2002. .. gives certain designated consumer bodies the right to make a “super-complaint” where they consider that there are market features (such as the market structure or the conduct of firms operating within it) that may be significantly harming the interests of consumers. The market in question may be regional, national or supranational (where the UK forms part of that market). Individual consumers do not often have access to the kind of information necessary to make a judgement about market failure and so the aim of the procedure is to encourage groups who represent consumers to make relevant super-complaints on their collective behalf. The OFT, or where appropriate the relevant sectoral regulator, will be obliged to respond to a super-complaint within 90 calendar days".

It does not take much imagination to see how super-complainant status can affect patent litigation. At present, a party seeking a compulsory patent licence in the UK under the Patents Act 1977 must effectively play the part of champion of a greater public interest, whether economic or of another nature, in seeking to persuade a tribunal that the private interest in the sanctity of an unused or underused monopoly right should be sacrificed to a greater good.  Unlike a compulsory licence applicant, who may have an expectation of substantial profit if the licence is granted, an application for, say, a patent to be subject to a licence of right, made by a super-complainant representing a vulnerable consumer group (hospital patients, perhaps?) might be more likely to succeed where it is viewed as altruistic.

Readers' opinions on ths guidance for super-complainants are welcomed.

Streamlined procedures: obstacles in the fast track

Today's Patents Court (England and Wales) judgment of Mr Justice Floyd in the supplementary protection dispute of Synthon BV v Merz Pharma GmbH & Co KGaA (briefly noted here on the SPC Blog; judgment, subject to editorial corrections, available here) is a salutary tale for those who like speedy trials.  

Right: the speed of a trial doesn't just depend on how fast the judge and litigants can run -- it depends on the law too

Said the judge:

"18. The action has been conducted without written or oral evidence under the streamlined procedure in the Patents Court".

He then lists "principal facts which are ... agreed (as opposed to assumed)". All this looks very promising: the parties both wanted to press on; they were going full speed ahead and they were even agreeing facts in advance -- though a minor rap on the knuckles was administered by the judge when he expressed his disappointment that he was given two different English translations of the same Bundespatentgericht decision ("46. I do not think there is much difference between them"). The hearing lasted a single day, with judgment delivered inside a month. What could go wrong?

The answer here is "the law". Synthon and Merz were arguing over the meaning of Article 2 of the SPC Regulation (Regulation 1768/92). One party's interpretation led to a conclusion that was "bizarre"; the other's interpretation that rendered the provision "otiose". There was nothing for it but to refer questions (on the precise formulation of which the judge has invited the parties to make submissions) to the Court of Justice of the European Communities for a preliminary ruling. This rather slows things down. The life expectancy of a healthy SPC is five years, with the possibility of a six-month paediatric extension in an appropriate case, but the average time taken to refer a case to the Court of Justice for a preliminary ruling and get the answer back is around the two-year mark. The SPC in this case was granted in 2003; Mr Justice Floyd will probably get his answer in early 2011, following which the litigation can slip back into streamlined mode.

The Court of Justice can accelerate the reference process but, as it made plain recently in Cases C-403/08 and 429/08 (the 'Greek football broadcasts to English pubs' cases, Order of 3 December 2008), an accelerated reference is only possible where there is both (i) importance of the main proceedings and (ii) urgency of giving judgment. Neither factor is apparently present in Synthon v Merz.  One might speculate as to whether parties should be given the option of an accelerated reference, where they can demonstrate that they have chosen a fast-track dispute resolution mechanism under national law and the trial judge certifies that they have complied with its requirements.

French ruling confirms jurisdiction in IP trials

In February the Cour d'appel de Paris confirmed that the civil courts (tribunaux de grande instance) have exclusive jurisdiction over IP cases in France. This ruling was given in a copyright dispute. The court added that this principle also applied in trade mark and design rights case, adding that this was so even though the decree which specifies which courts of first instance have jurisdiction in IP cases has not yet been published. The decision implies that -- except in actions involving only unfair competition issues -- all cases involving patents, trade marks, designs and copyright will be decided by the civil courts (with regard to patents, only eight courts have jurisdiction).

Source: note by Richard Milchior, Granrut Avocats, Paris, in World Trademark Review