Monday, 31 January 2011

PCC Page 14: Threats loom larger than the PCC

In this, the 14th in the series of Patents County Court (PCC) Pages, we continue the saga of the litigation between Cautious Co and its arch foe IPOff Ltd, which Cautious accuses of infringing various intellectual property rights in its robotic octopus.  PatLit thanks the Chartered Institute of Patent Attorneys (CIPA) and in particular its President Alasdair Poore, for supplying these episodes.  The tale now unfolds like this:
Cautious is suing IPOff in the PCC for patent and unregistered design right infringement.  Because IPOff’s boss is currently enjoying the winter sun (and for other good and plausible reasons), IPOff has applied for an extension of time for its defence.  IPOff would still like to make Cautious’ proceedings messy and expensive.
"Dear xxxx, Thank you for letting me know our success in applying for an extension of time.  It would be nice to know that Cautious has been clobbered in costs. 
 Your previous letter explained why Cautious’ patent attorney was so obscure in his “letter before action” [Threats issues].  This rang a bell – we had a major bid in to a betting syndicate for our product.  They were willing to give us a share of their profits resulting from successful predictions, which they expected to be millions. They cancelled their order when Cautious issued a press release saying it had this patent and was determined to enforce it; when they called Cautious he said not to touch us with a barge pole.  Our profits would have run to millions too.
 I would like you to launch proceedings against Cautious & Co for threats in the High Court. The PCC is clearly not suitable for such high damages. That will mean the PCC case will have to be moved to the High Court.
 In the meantime [some issues on the defence – to be discussed next week] …”
Although its aims are not very laudable, IPOff raises some interesting questions and points.  First, on costs (see CPR 44 generally on costs, subject to CPR 63(26) and CPR 45.42) – the court has a discretion (CPR 44.3):  there are several approaches to awarding costs on an application: among others, cost to one or other party (where one or other party can be said to have “won”), costs to follow the overall result (where the costs are incurred in the overall handling of the case), costs to be reserved until trial (where whether a party has “won” an issue depends on later findings), or no order for costs (see table in PD 43-48 Section 8.5 for description of various costs orders).  However, unlike the High Court, even in cases where one party is awarded the costs, the judge will not usually assess the amount of costs at that time.  That will be held over until summary assessment of the costs of the whole case (CPR 63.26(1)).  Note also that the maximum award of costs (£50,000) is determined after setting off costs awarded the other way (CPR 45.42(2)). In some cases, where a party has behaved unreasonably the court will make an order for costs at the conclusion of the hearing (CPR 63.26(2)). 
The second issue IPOff raises is  bringing a parallel set of proceedings.  It looks as though issuing threats proceedings in the High Court is improper and might be an abuse of process.  See for example Daniels v BBC ([2010] EWHC 3057) referring to CPR 1.4.15 (which appears not to exist!), and such cases can be struck out (CPR 3.4(2)(b)).  In this case there are probably no good reasons for bringing the threats claim in the High Court, as there is currently no damages limit in the PCC (although there is a plan to bring one in (see ALK-Abello v Meridian para 26).  Damages will potentially be a (subsidiary) issue in assessing whether the PCC is suitable for a case (see para 30).  But what happens if there is a damages limit and the amount of damages is essentially speculative.  Of course here the claimant AND defendant would be potentially able to agree that a higher limit should apply (CDPA s288(4)) – what happens then if the defendant refuses to agree?  
One of the issues which remains to be resolved by legislative changes is that currently an application to transfer from the PCC to the High Court has to be heard in the PCC, and an application to transfer from the High Court to the PCC has to be heard in the High Court (CDPA s289(1)).  The proposal is to change this, but in the meantime Cautious will have to make an application for dismissal on the grounds of abuse, or transfer, in the High Court – and of course there may be costs consequences, although one hopes that the court will deal robustly with attempts to disrupt proceedings.  If Cautious were to lose, IPOff would then have to apply to the PCC for transfer – a recipe for possible disaster!

Friday, 28 January 2011

"Damages for infringing invalid patents": a comment

The following comment has been received in response to Wednesday's thoughtful and provocative piece on the availability of damages for the infringement of a patent which is subsequently held invalid.   Blogger's Comments only allow for responses of up to 4,096 characters, which meant that this comment was too long to append to the original piece.  However, it is too valuable a contribution to the debate to be lost so it is reproduced here in its entirety.  The author has asked to remain anonymous though his identity, like the originator of Wednesday's piece, is known to PatLit.  He writes:

"The fact that this issue gives rise to such strong feelings and heated exchanges is clear evidence that it is an issue which needs to be resolved once and for all by the Supreme Court, and that opportunity may arise later this year in Virgin v Premium.

In the meantime, there are a few misconceptions which need to be addressed, and a few points of law which are not as clear as some people think…

First, let us get one thing quite clear at then outset. There is no correlation between the position of a licensee who has paid royalties and an alleged infringer who has had to pay damages.

The licensee enters into a deal. He chooses not to challenge the patent, but rather to pay for the ease of using the technology “unthreatened” by possible action by the patentee. The alleged infringer chooses the other course – to challenge the patent, saying “come and sue me” to the patentee, on the basis that he does not think the patent applies to his product or process, either because of non-infringement or invalidity or both. If he loses in court, the obligation to pay damages is imposed on him.

If the patent is subsequently found to be invalid, the “infringer” is proved right, and should not, in any just system, be obliged to pay for committing an act which was not, at any time, unlawful. The licensee, who has chosen to nail his flag to the patentee’s mast, will have had the benefit of his royalties, and can now also have the benefit of the “infringer’s” action.

Secondly, patents are a complication for the law of res judicata, even before any European factor is taken into account. In almost all cases, the principle of res judicata makes perfect sense. Once a matter has been litigated at court, the final judgment should be unassailable unless compelling evidence which was not available beforehand comes to light.

However, in patent law, if a patent is found to be invalid, or amended, then the effect of the invalidation or amendment is retrospective. The patent is deemed never to have existed, or always to have existed in its amended form. The problem this creates is obvious. The courts have approached in different ways. In Poulton, Coflexip and Unilin a strict compliance with basic principles of res judicata has been applied. However, in Dudgeon v Thompson, Kenrick & Jefferson, and PLG v Ardon a totally different approach was adopted. In PLG Aldous J said clearly:
“The practice of this court is that, after amendment, a patentee must start a fresh action rather than seek to enforce any relief he has obtained in a previous action (emphasis added). The practice is based upon the fact that there has been no judgment on infringement and validity in relation to the amended patent”
This passage illustrates precisely the point made above, that patent actions challenge the usual basis of the principle of res judicata. Those who support Unilin say simply of this passage from Aldous J that “he was wrong”. That is hardly an answer, and demonstrates precisely why this is a matter which needs to be resolved by the Supreme Court. It is worth noting that Dudgeon v Thompson is a House of Lords decision.

All of this becomes even more confused when the European angle is taken into account. In 1977 the United Kingdom adopted a new patent system which accepted the involvement of the European Patent Office and the European Courts. One effect of this is that the final arbiter on validity is the European Patent Office. At least as far as findings of invalidity are concerned, the EPO Boards of Appeal “trump” the UK court in an irreversible manner.

Bearing in mind that the principle of res judicata is based on finality – in other words that all avenues in the UK courts have been exhausted, how can a decision be truly res judicata in the UK courts if there is still recourse to the EPO? For these purposes the EPO must be seen as being within the UK system. That is how the system works. When a patent case reaches its conclusion in the UK, it will be known whether there are pending opposition proceedings in Munich – that is the way the timetable works. Where it is clear that such proceedings are underway, then no decision of the UK court can be truly final. Accordingly, the principle of res judicata is not in play.

It is no argument to say that infringement and validity are separate issues. That is not how our system works. We have not opted for a bifurcated approach as the Germans have.

What then is the rationale for Unilin? A simple uncomplicated reading of the decision, and the decision to refuse a stay in Virgin v Premium reveals that the motive of the Court of Appeal in both cases was not the upholding of the ancient principle of res judicata (which demonstrably does not apply), but rather “commercial convenience” and the avoidance of the “emasculation” of the UK courts by having the effect of their decisions delayed pending an EPO decision.

There may, just, have been some merit in that in the days when EPO proceedings were desperately slow, with no hope of expedition, though it was nonetheless a clear example of “bending the law out of shape” to achieve a commercial result. That is no longer the case. As Lord Justice Jacob himself has repeatedly asserted, if the courts and the parties engage with the EPO, it is possible to accelerate proceedings to avoid unhelpful longueurs.

In fact, in the Virgin case the Court of Appeal made its decision not to stay a damages enquiry at a time when the final decision of the EPO was barely three months away.

Put simply, the “evil” which Unilin sought to address is now no more than a memory, and it is a poor excuse to bend both the law, and perceived justice out of shape. I emphasise justice because no lay reader of this exchange would understand a position where a company or individual was obliged to pay very substantial “damages” in relation to an allegation of infringement of a “right” which either never existed at all, or only existed in a form which was not infringed by the alleged “act of infringement”. On the contrary, he may be somewhat surprised at the apparent reward for a patentee who pursues, and is willing to accept reward from a patent which is invalid. Surely that is contrary to public policy?

To test this one step further, look at other European jurisdictions? They also accept the primacy of the EPO, but find other practical means to avoid this situation arising. I do not propose to labour the points here, but suffice to say that the Unilin type of situation simply cannot arise on other major EPC jurisdictions.

A follow up message on this blog says “you have to define a time after which it is too late to get your damages back”. That actually poses the wrong question, but can simply be answered in this way. In cases where there are pending EPO opposition proceedings, that time is the final expiry of those proceedings. That is when there is finality under the UK legal system, and consequently when the principle of res judicata applies.

The situation where, in subsequent proceedings in the UK courts the patent is revoked as a result of new prior art, can be answered by saying that the party who paid damages had their chance to find that prior art and failed".

Technology agreement is "intellectual property litigation" for PALs, rules court

"High Court Clarifies Scope of Patent Attorney Litigators' Rights" is the title of an item posted earlier this week on the website of Hogarth Chambers.  Hogarth is well placed to comment on the case in question since it furnished barristers for both sides (Richard Davis acted for Atrium, while Michael Hicks and Jeremy Reed acted for DSB).  This note briefly reviews a decision last Friday of Mr Justice Lewison (Patents Court, England and Wales) which, the authors say, is believed to be the first judgment on the scope of the right of Patent Attorney Litigators (PALs) to conduct litigation in the High Court.  They explain:
"Under article 3 of the CIPA Higher Courts [Qualifications] Regulations, PALs have the authority to conduct “intellectual property litigation” which is defined as “any matter relating to the protection of any invention, design, technical information, or trade mark, or similar rights, or as to any matter involving passing off or any matter ancillary thereto.”

The proceedings concerned a worldwide technology transfer agreement in which DSB sold Atrium a bundle of ‘technology’. That ‘technology’ comprised patent applications, information and hardware. The agreement (although a sale and assignment, not a licence) provided for payment of deferred consideration in the form of a ‘royalty’ on any products sold by Atrium which incorporated the technology and a higher royalty if the product fell within the claims of the transferred patent rights. Atrium sold a product on which they claimed no royalties were due, and commenced proceedings in England seeking declaratory relief to that effect. DSB counterclaimed for payment of the royalties. Thus the main issues for trial would be whether, for the purposes of the contract, C-QUR incorporated the technology and whether C-QUR fell within the patent.

Atrium’s case was conducted by a PAL and the question arose as to whether he was entitled to act under the CIPA Regulations. There were potentially adverse consequences if the PAL was not entitled to act, including in relation to legal professional privilege and costs. In light of this Atrium applied to the court for a declaration that the ongoing proceedings did in fact fall within the scope of a PAL's authority to conduct intellectual property litigation.

Atrium argued that the case fell clearly within the regulations. It contended that it was part of a patent attorney’s day-to-day business to advise on the exploitation of IP and that was what this case was all about.

DSB’s stance was that the regulations were limited to proceedings relating to the protection of IP rights, and that article 3 should be construed in a manner that reflected that limitation. DSB contended that the present dispute was essentially about breach of contract – in particular, whether C-QUR incorporated certain features and technology, within the meaning of the contractual provisions, and as such it did not concern the “protection” of the underlying invention or technical information.

Atrium responded that if one looked at the strict wording, the article was not limited to the protection of patents and confidential information but the broader term ‘protection of inventions’. This would cover patents and ‘protection of technical information’ which would include protection by way of an obligation under a contract to protect confidential information. Moreover, contractual issues were often central to various matters which patent attorneys conducted under the 1977 Act such as entitlement proceedings and it cannot have been the intent of Parliament to deprive patent attorneys of privilege (which is worded similarly to article 3) when conducting such proceedings.

The judge accepted that the scope of article 3 was somewhat fuzzy at the edges, and held that it was appropriate for the PAL to have brought the matter to court for clarification.

The judge ruled in Atrium’s favour that the proceedings fell within article 3 and so could be conducted by a PAL. The judge held that IP rights could be protected and exploited in different ways – the IP rights might be exploited by the owner himself, they might be licensed, or they might be sold. As such, a royalty dispute would concern the “protection” of IP rights for the purposes of article 3, and the fact that the present dispute concerned deferred consideration was a distinction without a difference. The issue for the court was essentially the same, and Parliament could not have intended that PALs could conduct litigation for one but not the other. The court declined to decide a point that arose in argument, namely whether copyright claims fell within the scope of article 3.

The judge agreed that the effect of s.190 of the Legal Services Act 2007 was that the scope of privilege was coterminous with the scope of the authority to act under article 3.

The judge held that, as the application was primarily a matter as between the PAL and the court (as opposed to a normal inter partes application), there should be no order as to costs".
The full text of this decision has not yet been made available online on the BAILII website, so you should contact the authors at Hogarth for further particulars. There does not appear to be any information concerning this decision on the CIPA website.

PatLit thanks Peer Watterson (Withers & Rogers LLP) for drawing this item to its attention.

Wednesday, 26 January 2011

Damages for infringing invalid patents: a question of symmetry?

Earlier today a short comment on the IPKat weblog mentioned an article on the awarding of infringement damages where the infringed patent was subsequently held invalid.  This sparked off an exchange of views which has led to the posting below of the opinion of a distinguished patent practitioner whose identity has been withheld.  The author writes:
"In 2004, the Court of Appeal for England and Wales held in Coflexip v Stolt that once a defendant had been found liable for infringement, it would still be liable to pay damages (when eventually assessed) even if the patent was held invalid in later proceedings with a (necessarily) different defendant. Subsequent cases, most recently the Virgin Atlantic v Premium Aircraft case, have reviewed this decision which remains part of English law. The cases have recently been reviewed in an article in MIP (MIP, Dec/Jan 2011 p20, Evans et al).

This author's view is that the approach in Coflexip is undoubtedly the correct one. While the proposition may seem surprising, it is in fact entirely consistent with fairness in patent system. There are a variety of approaches that lead to this conclusion.

"In particular, I find symmetry a convenient tool by which to assess fairness. In Jeremy's scenario, there is no symmetric treatment of the parties - the first defendant would obtain multiple bites at the "damages cherry" until the patent is invalidated, whereas the patentee has no second chance once invalidity has been found. Turn the Tribunal B and A decisions around, and it is clear that as the law stands, tribunal A cannot hold the patent valid after tribunal B has held it invalid because once that has happened it is curtains for the patentee. So if the patentee is going to be fixed with finality, it is only fair that the same should apply to defendants.

In fact, of course, a defendant does benefit under the present system because while the damages liability remains - dealing with a crystallised liability in the past - the injunction into the future is nugatory because there is no longer a patent capable of being infringed. So the defendant already has had a leg up and doesn't need more.

It might pay the defendant in Tribunal B to drop the counterclaim for revocation and just pursue the invalidity defence. No inconsistent decision can then be created, and the B defendant is not placed in the invidious position of getting the A defendant off the hook by doing a better legal job. On the other hand, the scenario Jeremy preferred above is one that rewards the first defendant for the risk and expense borne by the second defendant and provides the patentee with no finality in litigation. It provides the first defendant with a second bite at the cherry that is not available to the patentee. It incentivises the first defendant to delay settlement or refuse to settle.

The key point in Coflexip is that the decision on damages is already a done deal. The only remaining question is quantum and it is just a question of timing and convenience that quantification of the liability is delayed to a later date. In other words, the damages inquiry is properly seen as teasing out the detail of an accrued right, and not deciding on new rights.

Which, in short, means Coflexip was rightly decided. Patent validity as a relative concept is already deeply embedded in the law - it is why there is no repayment of licence fees, settlement payments or accrued damages following a finding of invalidity. The risk of a patent being valid or invalid is a variable that is factored into all dealings with patents, and rightly so. It creates a value spectrum leveraging the perceived likelihood of validity, from rights that look decidedly dodgy and are valued and treated cheaply, to rights that look as good as you get and are valued highly. If payments were subject to retrospective correction after an actual finding of invalidity, then that raises risk and cost for the patentee which will tend to raise the immediate price for licensees for dealing with the patent, and thus make agreement more difficult to achieve and litigation more likely. It would be no more constructive to argue that historic payments should be retrospectively raised following a finding of validity, because the previous probabilistic assumptions about validity are resolved. The system is far better to stick with the treatment as is".
 Readers' thoughts and comments are keenly awaited.

Tuesday, 25 January 2011

PCC Page 13: Snails and Octopuses

In this, the latest episode on the revamped Patents County Court for England and Wales --supplied by the Chartered Institute of Patent Attorneys (CIPA) through the kind offices of its President, Alasdair Poore -- we continue the saga of Cautious v IPOff with further discussion of the issues of delay and timing.
Last week IPOff’s solicitor wrote to IPOff, seller of the Robot Octopus football results predictor, explaining that an extension of time for filing the defence would be necessary as Innocent (IPOff’s Director) was off, having an extended Christmas holiday snorkelling and studying octopuses.  He has asked the Cautious’ patent attorney if an extension of time would be agreeable and the company indicated that, in view of the holiday period, and because its client was generous, it would agree an extension of time of two weeks, if the judge were minded to order that.  IPOff’s solicitor is concerned at the lackadaisical approach of its client and that he still has not returned to the UK, so it proposes to ask for a longer extension.

“Dear Innocent, we last wrote to you explaining that we would need to apply for an extension of time.  You responded “Too **** right, and pull your finger out.”  It would have been helpful if you had provided slightly more extensive reasons for seeking an extension. 

You also suggested that we make the application as expensive as possible and hire a silk and junior to appear in the Court.  Please bear in mind that (a) the judge may decide that no hearing is necessary – the draft User Guide says on making applications is that normally they will be decided without a hearing unless the judge decides one is necessary; (b) making it expensive for yourself does not necessarily make it expensive for the other side – you certainly will not be able to recover any more costs: the cap does not mean that you can recover as much as the cap (and I remind you that they apply to each stage), and it is unlikely that the other side will be put to greater expense in arguing their position on an extension; and (c) the judge will certainly not be impressed – the Court is specifically designed as a forum for proportionately low cost proceedings, which can be argued in a straightforward manner [see eg ALK-Abello v Meridian, para 32], and the idea of using a silk on such an application, or indeed generally, will not give you any benefit.

Turning therefore to the substance of why an extension might be appropriate, you require good reasons [CPR63.22(6)]: Firstly you have said that the proceedings had come as a complete surprise to you, you had specifically planned this holiday of a lifetime – why octopuses? – months in advance, communications with you are fairly difficult, and you are essential to preparing the defence, both because you are the only person who knows details of the software you are using, and you would not trust anyone else to sign the statement of truth.

I have also looked at the “letter before action” etc. from Cautious’ patent attorneys on the matter.  To say the least it is somewhat obscure.  There is no suggestion that proceedings are going to be brought against you.  What it does do is ask you who the manufacturer or importer are and goes into some discussion about the arguments on infringement. We will therefore also rely on the fact that insufficient warning of the proceedings was in fact given, and although the Particulars of Claim assert that there is compliance with the Practice Direction on Pre-action Conduct, that is not in fact the case.

Finally, I would like you to give some urgent attention to the questions I asked in my last letter, and also to the question of infringement of unregistered design right by your designs of Robot Octopus.  .  I should specifically add that if your position is that you reached the design of the Robot Octopus independently, please provide me with full details [CPR63.20, Draft User Guide].

As noted last week, it seems likely that the judge will have some sympathy with a limited request for an extension of time bearing in mind the intervening holiday period.  The question in relation to compliance with the Practice Direction on Pre-action conduct is not so clear.  Readers will be aware that, under the Patents Act 1977 s 70 (as amended), the provisions related to threats have become somewhat wider but much more convoluted.  They now mean that if you know that the potential defendant is a manufacturer or importer (and a threat is made against them as such, and also may extend to other acts of infringement), there is no risk of a threats action s70(4)(b).  However, if you do not know that the potential defendant is a manufacturer or importer, then you run the risk of a threats action unless the threats are very clearly limited to making or importing (or using a process) (s70(4)(a)) – see PCC Pages No 3, for further discussion and cases).  You can, however, write putting the potential defendant on notice of the patent (s70(5)(a)), and ask for details of who the manufacturer or importer is (70(5)(b)).  In order to do this, you may also provide an explanation of the basis for saying that the product infringes (70(5)(c)). 

Cautious’s patent attorney stuck to the framework in the Act.  Its letter does not make clear that proceedings are imminent; the object of the threats provision is that the recipient should not perceive that it needs to stop because it might be sued.  We will have to wait to see what the Judge says about such letters.  The protocol contemplates that the recipient acknowledge it and give a full written response.  However the response to a letter under Patents Act s70(5) is not going to be addressed to the infringement issues, but just to answering the questions about maker or importer.  Each case will turn on its facts.  IPOff’s solicitor is cautiously optimistic that it will obtain an extension to 70 days plus a further 14 days while its client has been on holiday.  After all, there is no point in the judge insisting on too short a period with the risk that further material will turn up later.

Thursday, 20 January 2011

When it's too late to mend a broken patent

The decision of the Court of Appeal for England and Wales in Nokia GmbH v IPCOM GmbH & Co KG [2011] EWCA Civ 6 was delivered today by Lord Justice Jacob, speaking on behalf of his colleagues Mr Justice Norris and Lord Justice Sedley. For the background and a full comment see Matt Fisher's excellent piece for the IPKat here). This PatLit looks at just one thing -- the Court's comments about the arguable relevance of Directive 2004/48 on the Enforcement of Intellectual Property Rights ("the Enforcement Directive") to what on the face of it was no more than an appeal by IPCOM as a party seeking amendment of a patent for the purposes of infringement proceedings which it had commenced against Nokia. Could it be seriously argued by IPCOM that the Enforcement Directive's provisions had anything to do with an amendment application? Yes, said counsel for IPCOM; no said the court, rather emphatically. To quote from the judgment of Jacob LJ at length:

"(6) The Enforcement Directive

131. This provides a general obligation on Member States by Art.3:
1. Member States shall provide for measures, procedures and remedies necessary for the enforcement of the intellectual property rights covered by this Directive. Those measures, procedures and remedies shall be fair and equitable, and shall not be unnecessarily complicated or costly or entail unreasonable time-limits or unwarranted delays.[this is always going to be problem for national patent infringement litigation where, for example, there are opposition proceedings pending before the EPO or elsewhere]

2. Those measures, procedures and remedies shall also be effective, proportionate and dissuasive and shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse.
132. Mr Alexander submits that his proposed amendment and the procedure about it is covered by the Directive:
I am seeking to enforce the relevant patent and amendment is part of and parcel of enforcement of that patent.
133. I do not accept that. Amendment of a patent is quite distinct from its enforcement: amendment is a procedure concerned with narrowing the scope of protection, not a procedure concerned with enforcement of what is protected. If allowed it applies in rem [i.e. it concerns the status of the patent itself, not the conduct of a third party] or as it is sometimes put in an alternative Latin tag, erga omnes. There is simply nothing in the Directive suggesting it applies to amendment of a patent.

134. Moreover it would be very odd if it were. For amendment (limitation) of a patent is very much the sort of thing dealt with by the European Patent Office (including especially the new central amendment procedure but also amendment during opposition). The Office is not an EU institution and it is wholly improbable that the Directive was intended to apply to it at all.

135. In any event I cannot see that allowing the procedure to be dragged out by having a second trial is even consistent with the Directive. It would make things “unnecessarily complicated” and “unnecessarily costly” and would “entail unwarranted delays,” all things proscribed by Art. 3.

136. Accordingly I reject the Directive point. I would add that I am glad to do so for two reasons. Firstly it is strongly in the public interest that patent disputes which matter commercially (many do not or turn out not to, particularly in the case of EPO oppositions) are resolved as soon as possible.

137. Secondly no other courts in Europe, or indeed the EPO, allow a patentee who has had his patent found invalid, only then in the same court to propose a limitation to it. There are countries whose appeal systems are in effect fresh first instance hearings (that is also broadly the current system for EPO oppositions). For these it is not procedurally too late to offer amendments (fall back positions) between first instance and appeal. But even in such cases no one allows unfair hearings to take place and no one lets a patentee who has lost his patent before a court then formulate before that court fall-back positions. A patentee cannot, for instance, after the hearing before an EPO Board of Appeal, and after he has been informed by the Board that he has lost his patent, then start formulating amendments to his claims.

138. Indeed the requirement on parties to formulate their cases in time, and in particular upon a patentee to formulate amendments to his patent in time, so that they can properly be dealt with at a pre-arranged hearing is strengthening across Europe. For instance the Rules of Procedure before the Boards of Appeal were amended in 2007 (by CAD 35/07) to say this:
Art. 13 Amendment to a party’s case 
(1) Any amendment to a party’s case after it has filed its grounds of appeal or reply may be admitted and considered at the Board’s discretion. The discretion shall be exercised in view of inter alia the complexity of the new subject-matter submitted, the current state of the proceedings and the need for procedural economy. 
(3) Amendments sought to be made after oral proceedings have been arranged shall not be admitted if they raise issues which the Board or the other party or parties cannot reasonably be expected to deal with without adjournment of the oral proceedings.
Similarly in Germany, s.83 of its Patent Act brought in last year entitles the court to reject inter alia a defence to a revocation claim by an amended version of the patent presented after expiration of a deadline set by the court before the date for the oral hearing. It can do so if “the consideration of the new pleading would make necessary a postponement of the already scheduled date for the oral hearing and the respective party does not give sufficient excuse for the delay and it has been made aware of the consequences of missing the deadline.”

139. In short procedural tightening by way of making parties put up their cases in time for them to be dealt with fairly with at a pre-arranged hearing without adjournment is the trend in Europe. The message is: “put up in time, or shut up”. That can only be good for European industry".

Tuesday, 18 January 2011

PCC Page 12: Robot Octopus takes a break?

In this, the latest episode on the revamped Patents County Court for England and Wales --supplied by the Chartered Institute of Patent Attorneys (CIPA) through the kind offices of its President, Alasdair Poore -- we take up the story with news that the director of the alleged infringer is off on holiday ...
Innocent Pilate, director of IPOff, set off on six weeks holiday almost as soon as Cautious Co had served proceedings on IPOff for patent and design infringement.  IPOff is blithely unaware that Cautious Co is considering requesting judgment in default against it, but IPOff’s solicitor is now getting worried about nonchalant IPOff preparing its defence:

Dear Innocent, thank you for your cryptic email and I am glad you are enjoying some sunny relaxation.  I am about to spoil that.  As you know your defence is due 42 days after service of the Particulars of Claim.  We do not have time to prepare that now – your being away makes that worse – so I will have to make an application for an extension of time for service of the defence.  We are required to make it as soon as possible, and now is quite late enough.  We will ask Cautious first but an application still has to be made to the PCC.  I can try and recover some costs, but you are still going to be out of pocket on this.

Turning to the defence, I propose to address that in several parts.  I will mention the patent issues in this email.

Your defences are that you do not infringe and that the patent is invalid.  On infringement, I take it you agree that you have made the sales and other supplies which are mentioned; your issue is that your software is not remotely like that in the patent. 

Please provide a description of your product and how it works.  The Particulars of Claim (further copy attached) contain a table, as suggested by the PCC User Guide,  with an element by element analysis of your product compared with the elements of each claim.  Go through those and explain, on an element by element basis whether your software has that element or not, and how you reach that conclusion – if you think that the element in the claim means something different from what Cautious are suggesting, make that clear.  We can discuss it in more detail when you have done that.  But just a warning, if I have to do masses of drudge, it will cost you more, so the more you do the better.

Then invalidity is much the same.  We have found a couple of pieces of prior art.  It would have been useful if you could have helped us on this, and they are not very brilliant bits.  Please go through the prior art and prepare a table like the one in the particulars of claim and compare each one, on an element by element basis with the elements in the claim.  Use the same elements as in the table in the Particulars of Claim, except that if that seems not to make the comparison easy, do choose your element differently.  Again if I have to work on it, it will cost you more.

I am sure there will be gaps where you find the prior art does not contain all the elements of the claim.  We need to turn it into CONCISE FACTS AND ARGUMENTS, so the more you do the better.  I will deal with that later.

I look forward to hearing from you and hope you go on enjoying the sunshine, while it is freezing cold here.”

Readers will note that, in this case, the Particulars of Claim included a statement that the Practice Direction on Pre-action conduct had been complied with so that the time limit for the defence is 42 days (whether or not Practice Direction has in fact been complied with) (CPR 63.22(2) and (3)).  Time can be extended, but only on application to the court and “for good reasons”  (CPR 63.22(6)).  (The same incidentally applies to the 28 day time limit for filing a reply to a defence and 14 day time limit for filing the reply to a defence to a counterclaim). The User Guide (currently being prepared) says that the application must  be made in good time – ie a reasonable time before expiry.  The rules which apply to applications are CPR 23 unless amended by CPR 63.25.  The application does not apparently have to be in any special form – simply a request (CPR 23.1), should be made to the PCC (CPR 23.2(1), and the application notice filed with the PCC (CPR 23.3(1)), and a copy served on the other party (CPR 23.4).  It must state that an extension of time is sought and set out (the good) reasons for the extension.  In this case both the intervening holiday period and, if really the case, the fact that there has been non-compliance with the Pre-action practice direction or little compliance could be reasons.  It is sensible to ask the other party first here, so that if the parties agree that is clear to the Court. 

The other party must file a response, if they need to, within 5 days of the notice being served on them (CPR 63.25(2)), and in general the PCC will deal with the application without a hearing (CPR 63.25(3)).

In relation to the Defence, CPR 63 and PD 63 provide details of what should be included.  It must set out all facts and arguments on which the party relies (CPR 63.20(1)), and, as with all statements of case, must have a statement of truth signed by a person having actual knowledge of all the facts alleged (CPR 63.21).  Unlike the Patents Court, the grounds of invalidity must be included in the Defence (PD63 28.1), and the guidance is going to invite parties to submit a “claims table” to assist in analysing the differences etc.
We wish Innocent a pleasant continuing holiday.

Thursday, 13 January 2011

Double patenting

Amgen v Teva has just been ruled in the US District Court of Delaware (copy of the ruling, dated January 7, 2011, here). Now it may be clear: cancellation action can’t be based on later-filed patents. Teva just thought it was worth a try.

US Patents involved are:

.- Patent No. 6,011,068. Application was filed on December 8, 1994. It was issued on January 4, 2000 and will expire on December 14, 2016 (the "'068 patent").

.- Patent No. 6,031,003. Application was filed on June 7, 1995. It was issued on February 29, 2000 and will expire on December 14, 2016 (the "'003 patent").

.- Patent No. 6,211,244. Application was filed on April 3, 2001. It was issued on April 3, 2001 and will expire on October 23, 2015 (the "'244 patent").

The argument:

“Defendants also argue that the court should invalidate
the '068 and '003 patents for obviousness-type double patenting over the '244 patent.

“Defendants' double patenting argument turns on the peculiar facts of this case. Because of the change in patent terms as of June 8, 1995, the '068 and '003 patents on the genera compounds will expire after the later-filed and later-granted '244 patent on the species. Defendants argue that the '068 and '003 patents impermissibly extend patent protection to cinacalcet beyond the term granted by the '244 patent. In support of their position, defendants rely on Ex Parte Pfizer, a decision from the Board of Patent Appeals and Interferences. No. 2009-4106, 2010 WL 532133, at *14-*24 (B.P.A.I. Feb. 12, 2010).

In Ex Parte Pfizer, the PTO reexamined a patent granted on medicinal compounds used to treat erectile dysfunction. The reexamined patent, the '012 patent, was filed prior to June 8, 1995 and expired in October 2019, seventeen years from its issue. The '012 patent claimed a treatment for erectile dysfunction through oral administration of a genus of compounds. Pfizer also owned two other patents, the '511 and '945 patents, the applications for which were filed after June 7, 1995. The '511 and '945 patents claimed treatment of erectile dysfunction through administration, oral or otherwise, of particular species of compounds within the genus of the '012 patent. The '511 and '945 species patents will expire October 2015, four years before the genus '012 patent will do so.

The Board of Patent Appeals and Interferences found that the '511 and '945 patents could serve as double patenting references for the '012 patent even though they issued later in time and expired earlier. The Board reasoned that the '012 patent prevented the public from practicing the art taught in the '511 and '945 patents beyond the terms of those two patents, which the Board argued is the purpose of the double patenting doctrine. In the Board's view, it is the patent term and not the issue date that determines whether a patent can be a double patenting reference. In a separate analysis, the Board found the oral administration claimed in the '012 patent obvious in light of the '511 and another Pfizer patent”.

How could this be explained? It is uncertain:

“The opinion does not explain why a later-issued patent with a shorter term should be used to abridge the term of a valid, earlier-granted patent with a longer term”.

Is there any American colleague out there that could bring us some light?.

Following documents could be useful (or bring more doubts):

.- Definition of Double Patenting by the USPTO here. In this document we read:

"In re Zickendraht, 319 F.2d 225, 232, 138 USPQ 22, 27 (CCPA 1963) (Rich, J., concurring). Double patenting results when the right to exclude granted by a first patent is unjustly extended by the grant of a later issued patent or patents. In re Van Ornum, 686 F.2d 937, 214 USPQ 761 (CCPA 1982).
If it is determined that the same invention is being claimed twice, 35 U.S.C. 101 precludes the grant of the second patent regardless of the presence or absence of a terminal disclaimer. Id".

.- Ex Parte Pfizer here.

Tuesday, 11 January 2011

PCC Page 11: Getting your tentacles in a twist

New readers start here: Last year PatLit published a series of 10 "PCC Pages", devoted to the newly-revamped Patents County Court (PCC) for England and Wales and how to use it (an index of the first ten PCC Pages can be found here).  Each page has been supplied by the Chartered Institute of Patent Attorneys (CIPA), through the kind offices of its President, Alasdair Poore.

The PCC Pages are themed on a piece of litigation brought by Cautious Co., whose Mr Cautious is anxious to deal a lethal legal blow to his competitor IPOff Ltd, an alleged infringer in respect of Cautious's Robot Octopus ...

Old readers can pick up the thread here, with this letter from Cautious's professional representative to his client ...
You can't acknowledge
service if you never received 
it in the first place 
“Dear Mr Cautious, you will recollect that we served proceedings on IPOff Limited in respect of the Robot Octopus, together with particulars of claim, just before Christmas. As I mentioned to you at the time, if IPOff (as we could have guessed they would from their previous blasé approach) failed to file and acknowledgement of service, in the PCC they still have 42 days to file a defence.

However, they have got their tentacles into a twist here. We have not received an Acknowledgement of Service and, in the light of a recent case, where the Court seemed to have muddled things a lot, I also checked with the Court and they have not received one either. Although IPOff still have the same time to file their defence, if they do not file an Acknowledgement of Service – required within 14 days of the particulars – we could seek judgment in default.

This is likely to be something of a tactical manoeuvre for several reasons. We can simply make a request for judgement which is a very cost-effective option and you can do this without giving notice to IPOff at all. But there are some important points:

• the claim must just be for money damages (although these can be assessed by the Court), or you must abandon claims to any other remedies;
• IPOff could apply to set aside the judgement in default and the judge may do so if there is a realistic prospect of defending the claim.

(There are quite a lot of other issues, but I won’t bore you with them here [see Civil Procedure Rules (CPR) 12.2 and 12.3 in particular]).

Given the time that IPOff have been infringing, this could still be a pretty embarrassing episode for them, and would certainly bring them to the negotiating table.

Alternatively you can make an application for judgment in default. This must be made to the Court and you have to give notice to IPOff. Although this will embarrass them (or their solicitor), the likely effect is that it will simply result in them filing a defence, and leave you with the additional cost of having initiated the application.

Give me a call so that we can discuss this.”
In his judgments just before Christmas on Media C.A.T. v A [2010] EWPCC 17 (and 18) – involving many cases of alleged copyright by sharing pornographic films over peer-to-peer file sharing networks – Judge Birss QC explained the intricacies of requesting judgment in default under CPR 12.

In most intellectual property cases it is likely that this will have relatively little application, because judgment in default, under CPR 12 can only be sought if the only remedy is a monetary one (either a specified sum of money of a sum to be assessed by the Court) (CPR 12.4(1)), or if claims to any other remedies are abandoned (CPR 12.4(3)). Most cases of IP infringement include claims for injunctive relief and/or declarations and/or delivery up. So a choice will have to be made as to whether to abandon these remedies. In practice it is likely that, if there is a subsequent infringement, the same remedies can be sought again (other than delivery up of materials subject of the first infringement) so this may not be so great an issue.

The second issue is that in many cases the claim is for an enquiry into damages, and there will not be evidence of the full scope of infringement, so that the court will not have the material to assess any damages above a pretty nominal amount.

However, in the right cases – those where the defendant may well not respond – it may well be worth drafting the particulars with the possibility of seeking default judgment under CPR 12, by ensuring that there is a monetary claim and that there is sufficient evidence to assess this included in the particulars. It would at least be a lesson to IPOff that they should not be so cavalier with potential proceedings.

It is also worth noting that the judgment may be set aside under CPR 13. If it is set aside, then any claims (such as to an injunction) which were abandoned, are automatically restored (CPR 13.6). And if you have done your job properly, it is likely that this will be on conditions (CPR 3.1(3)). On the other hand if there really is a pretty reasonable argument on the defence and there is an expectation that the defendant will soon respond with it, in practice it may not be very worthwhile. It will, cost money, cause some small embarrassment, and not necessarily progress matters very effectively.

There are some other salutary lessons to be learnt from Media C.A.T. First, do not suppose that the court has necessarily completed all the steps they should be completing (either in sending out documents to defendants, if you leave that to them) or in telling you what has happened. Judge Birss observes (para 35) that the White Book comments that the CPR are somewhat vague as to whether the defendant must serve the defence on the claimant, and it may be that the Court has not sent it to you.

In this case this may have resulted in the professional advisors requesting default judgement in circumstances when it was simply not appropriate and making a representation to the Court that defences had not been filed when in fact they had. This is not intended as a criticism, but just an observation.

Patent attorneys are just as competent as solicitors to represent clients in the PCC – and it is time to make sure clients obtain the benefit of this.

Monday, 10 January 2011

The end of the American (damages) dream?

Most of the times a patent case is ruled in the US I’m surprised with the amount of damages award. I usually have the impression that more than damage repair, US Courts apply punitive damages.

The situation may change with the decision of the US Court of Appeals of the Federal Circuit in Uniloc v. Microsoft, rejecting a very popular damages calculation rule (the 25% rule of thumb). We read uin the ruling:

“Section 284 of Title 35 of the United States Code provides that on finding infringement of a valid patent, damages shall “in no event [be] less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.” In litigation, a reasonable royalty is often determined on the basis of a hypothetical negotiation, occurring between the parties at the time that infringement began.

The 25 percent rule of thumb is a tool that has been used to approximate the reasonable royalty rate that the manufacturer of a patented product would be willing to offer to pay to the patentee during a hypothetical negotiation.

there must be a basis in fact to associate the royalty rates used in prior licenses to the particular hypothetical negotiation at issue in the case. The 25 percent rule of thumb as an abstract and largely theoretical construct fails to satisfy this fundamental requirement. The rule does not say any-thing about a particular hypothetical negotiation or reasonable royalty involving any particular technology, industry, or party. Relying on the 25 percent rule of thumb in a reasonable royalty calculation is far more unreliable and irrelevant than reliance on parties’ unrelated licenses, which we rejected in ResQNet and Lucent Technologies.

evidence purporting to apply to these, and any other factors, must be tied to the relevant facts and circumstances of the particular case at issue and the hypothetical negotiations that would have taken place in light of those facts and circumstances at the relevant time”.

It seems to me that from now on it will be difficult to reach figures we have seen in the past.

Friday, 7 January 2011

No problems for patent enforcement in Europe? It seems so ...

It was just before Christmas, on 22 December, that the Report from the Commission on the Application of Directive 2004/48/EC of the European Parliament and the Council of 29 April 2004 on the enforcement of intellectual property rights SEC(2010) 1589 final, COM(2010) 779 final, was published. This report, which was required by Article 18 of the Enforcement Directive, concludes that the Directive has had a substantial and positive effect on protecting intellectual property rights under civil law in Europe.

The bad news is that the sheer scale of infringement is a terrifying prospect to tackle, not least because of the unprecedented increase in infringement opportunities offered by the internet, a challenge which the Directive was not designed to address.

The good news is that there are apparently no problems whatever with regard to the enforcement of patent rights. The word "patent" appears just once in the document, in the anodyne context of the Executive Summary which reads:
"The Directive created high European legal standards to enforce different types of rights that are protected by independent legal regimes (such as copyright, patents, trademarks and designs, but also geographical indications and plant breeders' rights)".
The Commission welcomes any feedback on the nine-page report, which you can read in full here, by 31 March 2011.

Tuesday, 4 January 2011

Patents, Penalties, Prejudice and Poker: it's litigation costs again

An essential piece part of the
patent litigation team's equipment
Intellectual property solicitor and litigation expert Chris Ryan is also something of an academic, which explains both the content of the following note and its timing.  PatLit is grateful to Chris for sharing his experience and his perspectives with us on a subject that is never far from any patent litigant's thoughts: costs. Writes Chris:
"The English law approach to litigation costs is capable of generating something akin to a game of poker. It culminates in the moment when, at the end of trial, the loser produces the “without prejudice save as to costs” offer it made previously and invites the court to penalise the winner for having fought on in the face of an offer that it ought to have accepted. One of the rules of the poker game seems to have changed as the result of a non-IP case decided last November. It is a case which, embarrassingly, I missed when running a session on the topic during the last weekend of teaching on the Nottingham Trent University LLM in IP Litigation in December. This note is based on the correction I sent out to the attendees shortly before Christmas.

But first, for those from non-poker playing jurisdictions, the relevant English Court rules are these:
• The loser will normally be ordered to pay most of the winner’s legal costs, unless the party emerging as overall winner lost on more issues than it won or has behaved badly in some respect.
• But if the loser previously made an offer to settle on terms that the winner has not beaten at trial the costs burden may be substantially reversed, with the loser being awarded the costs from the date when the winner should have accepted the offer.
• Offers like these (which are not disclosed to the trial judge until after a decision has been reached) can have particular power when made by a claimant because the defendant who fails to better the offer at trial may then be ordered to pay the claimant’s costs assessed on a more generous basis plus interest on both damages and costs, at a penal rate.
• Defendant offers do not play a large part in IP litigation but the process is capable of providing a claimant with a potent weapon if it makes an offer at the outset to accept, for example, an injunction plus £1 in damages.
• Such offers sometimes (but not always) follow the formal requirements imposed by Part 36 of the Civil Procedure Rules (Offers to Settle, here). They may be taken into account, under the Court’s discretion, even if the formalities have not been followed, but certainly the full advantages of a claimant’s offer are much less likely to be achieved if the offer did not comply with the Part 36 requirements.

One of the issues I covered in teaching was the rule (CPR 36.9(2)) that permits a Part 36 offer to be accepted at any time, unless it has been withdrawn. I drew attention to CPR 36.10(4)(b), which provides that where an offer is accepted outside the deadline for acceptance imposed by the offeror (normally 21 days) then “if the parties do not agree the liability for costs, the court will make an order for costs”.

I made the point that if an offer stated that it would be deemed to be withdrawn if not accepted within the deadline, the offeror would maintain a strong position. If the other side subsequently decided that it did, after all, want to accept the offer it would have to persuade the offeror, in effect, to renew it. And the offeror would then be able make the renewal conditional on the other side agreeing to pay all costs up to the date of the renewed offer, possibly at a fixed figure. But if the offer had remained open for acceptance the offeror would probably find itself facing a further court application and arguments that the normal costs rule should not be imposed because, for example, the offeror’s conduct had been part of the reason for late acceptance, or that the costs claimed were excessive.

Subsequently the extremely well-informed David Musker drew my attention to the case of C v D & D2 [2010] EWHC 2940 (Ch), decided by Warren J on 16 November 2010, which undermines the recommended strategy. The Judge decided that an offer that automatically comes to an end according to its own terms is not capable of constituting a Part 36 Offer. No doubt it might still be taken into account, as a without prejudice save as to costs offer, when the court comes to exercise its discretion as to the appropriate costs order to impose at trial. But, as a matter of policy, the particular sanctions that are imposed by Part 36, particularly on a defendant, for not accepting an offer that is then beaten at trial should only be available to an offeror who has left his offer open for acceptance. The Judge first summarised the main argument put to him in favour of this approach, as follows:

“The policy of Part 36 can thus be identified, under this argument, as being to encourage a defendant to accept a reasonable Part 36 offer from the claimant but so that, if the offer is not kept open, by being withdrawn or changed detrimentally, the sanction ceases to apply. The successful offeror can take the benefit of the provisions only, as the quid pro quo, if he has left it open to the offeree to accept the offer…

“It would not be consistent with that policy for there to be a time-limited offer making the defendant subject to the risk of the rule 39.14(3) sanction [defendant to pay indemnity costs plus enhanced rate interest] whilst not obliging the claimant to leave his offer open”

Then, later, he approved that line of argument in the following terms:

“In my judgment, a time-limited offer, as I have described it, is not capable of being a Part 36 offer. I consider that the structure of Part 36 in general and the provisions of rule 36.2(2) and rule 36.14(6) in particular, establish that an offer must be capable of acceptance unless and until withdrawn by service of a notice within rule 36.9(2), although an offer may also be changed; but if its terms are less advantageous, the costs sanction under the rule 36.14(6) do not apply.”

Perhaps it was never appropriate for the poker player to say, in effect, that he would withdraw his chips from the table if his opponent did not fold immediately. Now Warren J has confirmed that it is definitely against the rules of the house".

Spain: Modification of EP translations

On November 4, 2010, Spanish Supreme Court has granted three appeals filed by Pfizer and Warner-Lambert regarding denial of modification of translations of three of their European Patents.

According to the Spanish reservation for product protection provided for in Article 167, paragraph 2(a) of the European Patent Convention, pharmaceutical products couldn't be patented in Spain until 7 October 1992. Up to that date pharmaceutical European Patents designating Spain where translated into Spanish making reference to processes and avoiding references to products.

After that date, plaintiffs filed request for modification of the translation at the Spanish Patent and Trademark Office, in order to include products claimed in their European Patents. Modification was rejected and both companies appealed.

Spanish Supreme Court has now granted the appeals arguing that the owner may purposely reduce the extension of a European Patent through translation. As pointed in the rulings, this would not only be the case of application of reservations made according to Art. 167.2, but also those limitations intentionally made by the owner according to agreements with other companies or to economic or commercial reasons. Since those reasons may disappear, the SSP states that the owner should be entitled to request any time a modification of the translation in order to obtain full protection of the European Patent in Spain.

Patents involved are:

.- Pfizer's EP0463756, filed on 7 June 1991 - Text of the ruling (Spanish) here.

.- Pfizer's EP0440372, filed on 24 January 1991 - Text of the ruling (Spanish) here.

.- Warner-Lambert's EP0247633, filed on 29 May 1987 - Text of the ruling (Spanish) here.