Foiled! A sad tale of boss and emboss

Boegli-Gravures SA v Darsail-ASP Ltd and Andrei Ivanovich Pyzhov [2009] EWHC 2690 (Pat), a decision handed down by Mr Justice Arnold in the Patents Court (England and Wales) today, took the regular form of an infringement claim met by a denial of infringement and a counterclaim for revocation. The technology in question involved the embossing of packaging foil for cigarettes.

Two interesting points arose from the judgment: one was that neither side's expert was entirely expert (one's experience was as a buyer of machines rather than as a designer of them, while the other lacked experience in the market in question). The other was as to whether the second defendant, Pyzhov, a director and shareholder of the first defendant company, was personally jointly liable with the company for any infringing acts.

The judge found the patent valid and infringed and held Pyzhov liable. After reciting the applicable principles as annunciated in the copyright infringement dispute of MCA Records Inc v Charly Records Ltd [2001] E5WCA Civ 1441, [2002] EMLR 1 he concluded that the case for the director's liability was established on the facts:

"136. The background facts include the facts that (i) Mr Pyzhov is one of three equal shareholders and directors of Darsail, (ii) Darsail is a small company which has had a total of 9-12 employees during the relevant period, (iii) Mr Pyzhov would know about anything important that happened within the company, (iv) Mr Pyzhov was the principal inventor of Darsail’s roller technology, (v) Mr Pyzhov personally registered the domain name darsail.com and controls the contents of the website and (vi) Mr Pyzhov was one of three named contacts on the website. In my judgment these facts are not enough in themselves to make Mr Pyzhov jointly liable [This must be right. They may reflect on the facility or the opportunity for Pyzhov to infringe, and on any benefit he might expect to derive from it, but none is part of a causal link to the infringements specifically alleged].

137. The facts relating to Mr Pyzhov’s involvement with the infringement are that (i) he personally dealt with Mr Green [the alias of a private investigator working for Boegli's client BAT] virtually throughout the negotiations, (ii) he together with his two co-directors made the decision to supply the Famous Flavor rollers to Mr Green and (iii) he made the decision to supply the Mayfair foil to Mr Green. In both cases he gave, or was involved in giving, the instructions to Darsail’s staff. In my judgment these facts are sufficient to make Mr Pyzhov jointly liable, since he was personally involved in committing the infringing act. He thus went beyond merely performing his constitutional role in the company".

A close call? Probably not, though claimants may have some tough calculations to make when determining whether it's worth pressing for joint liability -- particularly if the argument in favour is less strong and the likely benefits are unclear.

Should appeal courts have a didactic role?

In an article last Friday for Intellectual Property Watch, ("US Federal Circuit May Offer Patent, Tech Policy Guidance For High Court"), Winter Casey reports on a lecture by Rochelle Dreyfuss, a professor at New York University School of Law, in which she is reported as suggesting that the United States Federal Circuit Court of Appeals should act more like a teacher to the Supreme Court and do a better job explaining its policy reasoning when it makes decisions on innovation-related cases: if the Federal Circuit was clearer in how it reached its conclusions in patent disputes, the Supreme Court might opt to get involved in fewer patent cases. The article reviews responses to Professor Dreyfuss's suggestions and adds:

"... Dreyfuss’ remarks came at a time when the Supreme Court is weighing in on more patent cases - the upcoming case of Bilski v. Kappos has received significant attention by industry ... and patent legislation is still pending before Congress.

... former USPTO Solicitor of Patents and Trademarks Nancy Linck said that Dreyfuss’ recommendation that “the Federal Circuit provide more policy rationale for their decisions to assist district court judges in following its precedent … is an excellent one.”

Linck added that “I agree with her that, if the Federal Circuit explained the policy considerations underlying its decisions, the number of reversals of district court cases might be reduced, and the Supreme Court might grant certiorari less frequently.”

Another patent lawyer attending the event said the role of the Federal Circuit is “to take a position that is consistent with the statute and also consistent with sound policy. If there is tension between what the Federal Circuit is doing and what the Supreme Court has done in the distant past, the Federal Circuit should acknowledge that tension and explain the policy reasons underlying its choice. As [Dreyfuss] said, the goal should be to substitute dialogue for hierarchy.”

... The Federal Circuit was set up as an experiment in specialisation, and there were concerns about risks of court capture by special interests, neglect of non-patent incentives to innovation such as intellectual curiosity, prizes or competition, as well as possible jurisdictional isolation of cases.

Dreyfuss said the experiment has been a “raging success,” with jurisdiction beyond patents, no capture, and eliminating “forum-shopping” of cases while establishing uniformity and predictability (possibly at the expense of flexibility). She said the increase in the more generalist Supreme Court reviews of the more technical Federal Circuit decisions could be a coming of age for the experiment.

She also said that the Federal Circuit’s history “reveals a strong interest in strengthening patent value and stemming what was perceived as a flight to trade secrecy.” But now, she noted, there are issues of too many patents and of lower quality. This is where the Supreme Court has moved in (taking more patent cases while taking less cases overall), helping the patent system to evolve and fitting it into the economy as a whole".

Superficially the notion of the Court of Appeals for the Federal Circuit acting as a teacher to the Supreme Court is attractive, for the reasons outlined. However, the reason why cases come before that court is that one or more parties to a live dispute have appealed a decision of the trial judge to that court and the prime function of any appellate tribunal should be to resolve the issues that led to the litigation arising in the first place. Neither the Federal Ciruit's appeal judges nor the members of the US Supreme Court have been elected in order to determine patent policy and it would be unfortunate if the direction taken by the US patent system were taken by the fortuitous circumstance that some issues have been raised on appeal while others have not.

Committal proceedings not the best way of resolving infringement issues

It’s not often that PatLit turns to a copyright case for inspiration, but the resolution of patent infringement issues gets a mention in Grisbrook v MGN Ltd and others [2009] EWHC 2520 (Ch), a 16 October decision of Lord Justice Patten sitting as a Chancery Division judge. This was an application for committal for contempt, or alternatively for sequestration of the assets, of MGN following an alleged breach of a consent order in copyright infringement proceedings. Said Patten LJ:

"72. To be a contempt the defendant's conduct must be intentional and the act complained of must be done with knowledge of all the facts which make it a breach of the order. It is not, however, necessary to prove that the defendant knows it is a breach of the order. [One of the infringements was], at most, a technical breach of the order which was remedied once the problem … had been recognised. …

73. The position with respect to [the operation of a back issues website which, the defendant argued, was impliedly licensed] is more complicated. Although…, their operation does constitute an infringement …, this is an important and by no means straightforward point of law on which MGN, on advice, was entitled to take a different view. …. The fact that its motivation is in part commercial does not detract from the importance of what is in issue.

74. I take the view that disputes of this kind should not be resolved through the medium of committal proceedings. This is not a point which featured in the two actions that led to the consent order and it should have been resolved in ordinary proceedings to determine whether an infringement was involved in the operation of the websites.

75. The dangers inherent in generally worded injunctions or undertakings not to infringe a patent or copyright have long been recognised. They can often lead to a further round of litigation in order to determine whether an infringement has occurred. The resolution of this issue in the context of a committal application was described by Romer LJ in Multiform Displays v Whitmarley Displays [1956] RPC 143 at page 158 as highly inconvenient. In the House of Lords ([1957] RPC 260) Viscount Simonds (at page 262) said this:

"Thus it is, my Lords, that upon what was a motion for sequestration and committal your Lordships are asked to try an action for infringement of a patent, and, inconvenient though such a procedure may be, it cannot be denied that there is ample precedent for it, nor that in certain cases it may be an expeditious way in which patentees can enforce their established rights. It may, nevertheless, well be doubted whether in the present case it would not have been a better course if advantage had been taken of the facilities offered by Sec. 66 of the Patents Act, 1949, to have the issue of infringement tried in proceedings unattended by threats of committal and sequestration."

76. The corollary to this is that a respondent who on advice and in good faith maintains that the conduct complained of does not amount to an infringement should not ordinarily be penalised by a fine or sequestration in the event of failure merely because the applicant has chosen to use committal proceedings rather than to bring an ordinary claim in order to resolve the infringement issue".

Patent litigation in the US and Japan: what's the difference?

PatLit is pleased to announce that on Tuesday 8 December it is holding a seminar at which the speaker is Professor Toshiko Takenaka (Associate Director, Graduate Program in Intellectual Property Law and Policy Director, CASRIP). The subject of her talk is "Patent litigation in the US and Japan: what's the difference?". The venue is the London office of Olswang, just over the road from Holborn tube station.

Professor Takenaka has professional experience both in-house (with Texas Instruments Japan) and in private practice (with the Yamasaki Law & Patent Office). She is also the editor of Patent Law and Theory: a Handbook of Contemporary Research (Edward Elgar Publishing, 2009).

The event runs from 5.30pm to 7pm and will be accompanied by refreshments. There is no charge for admission. If you'd like to attend, please email Sandra Holloway here.

The other side of the molecule: Teva seeks to protect its patch

Better known for its prowess as a manufacturer of generic pharmaceuticals, Teva Pharmaceutical Industries has just been given the opportunity to show just how well it can play the patent system from the other side, as a patent proprietor, in its battle to protect Copaxone (glatiramer acetate), a top-selling drug that the company has developed in-house. According to Israeli newspaper Haaretz, Teva has just commenced proceedings against Mylan, alleging that the latter's application to sell its own version of Teva's multiple sclerosis drug infringed its US patents. Similar proceedings have been launched against Indian company Natco.

In terms of Teva's timing, its patent is not scheduled to expire till May 2014; Mylan went public with its intention to sell generic Copaxone nearly a year and a half ago, in June 2008, when it announced a supply deal with India's Natco Pharma, but it's only a month ago that US regulators accepted Mylan's and Natco's application to challenge the Copaxone patents and make and sell their own version.

Teva's lawsuit would, according to the report, restrict approval of Mylan's generic version of the drug for up to 30 months - April 2012 - or until a court ruling in favour of Mylan, whichever comes first. Copaxone is worth fighting for, being reputedly responsible for roughly 20% to 25% of Teva's net profit. According to the article:

"Teva's position is that Copaxone is a highly complex drug. Because of the difficulty in characterizing its molecular structure, Teva says it doubts that any company could prove beyond doubt that its version is identical to the original Copaxone. The slightest error in characterizing the chemical structure of the drug could affect its activity, says Teva, and compromise the patient's safety".

Fulbright review of lit trends -- patents down but not out

The Fulbright & Jaworski 6th Annual Litigation Trends report has just been released. On patents, this US-centric but nonetheless highly valuable piece of research has this to say (as summarised by Reuters):

"What`s New in Patents

27. Patent Offense: Has patent litigation gone by the wayside as in-house counsel preoccupy themselves with bankruptcy litigation, labor and employment suits and regulatory matters? Or, in the face of reduced budgets, are in-house counsel simply pushing patent disputes down on their priority lists? [What about increased activity in terms of licensing, cooperation in standards-setting organisations, reverse settlements etc? Could these explain the dip?] In the 2008 survey, 21% of respondents reported having been involved with at least one patent infringement proceeding as a plaintiff in the past 12 months. This year that number is down to 17%. In patent-heavy industries like technology and manufacturing, however, the numbers are as much as twice that [I'm not sure if this means twice as high or twice as low].

28. Patent Defense: With patent claims going down, there was a corresponding drop in companies that have defended against patent infringement claims in the past 12 months [If the drop is proportionate as between claimants and defendants, that might point to e.g. more licensing or better mediation ...].

29. What`s Ahead: Corporate counsel do not seem to expect much of a jump in the coming year: 92% of respondents said they expect the number of patent infringement suits their companies will be involved with as a claimant to remain the same in the coming year. In-house counsel at technology companies do not expect to see a rise in the patent suits they file, though 15% of them expect an increase in the number of patent suits they will be involved with as a defendant [Does this mean they are taking 15% more risks with third party patents?]".

I've not got the time and the opportunity to read beneath the headlines right now, but PatLit will be pleased to publish any informed comments and explanations from those who have the chance to read this work properly.

Reuters press release here
Note on Fulbright & Jaworski's website here
Full report here

Patents County Court: poll results

PatLit asked you to consider, "If no-one wants to be the next Patents County Court Judge, what should we do?" The votes have been counted and the results are in.

A clear majority, over 40%, considered that the current Patents Court Judges should take it in turns to hear patent cases in the Patents County Court ("PCC"). The remainder favoured the following options: persuading bored, retired, patent litigators to come out of retirement and take on the role of PCC Judge (18%); allowing non-IP specialist judges to hear patent cases in the PCC (12%); or outsourcing the cases to a low-cost jurisdiction (somewhat surprisingly, also 12%).

Patent litigation and the reporting of forward expectations

Last Friday's Reuters press release, "Australian Appeals Court Lifts Temporary Injunction Against Smith & Nephew Foam Dressing Kit", reports on the announcement by Kinetic Concepts, Inc. that the Full Court of The Federal Court of Australia had lifted a temporary injunction in its patent litigation with Smith & Nephew in a dispute over the latter's sale of foam dressing kits for negative pressure wound therapy in Australia, with the trial of the infringement issue being scheduled for June 2010. KCI is seeking monetary damages and permanent injunctive relief against Smith & Nephew in Australia for the marketing and sale of NPWT dressing kits which KCI believes infringe a patent licensed to KCI from Wake Forest University Health Sciences.

Not just the final result but even the interim stages of a patent dispute are eagerly watched by lawyers, particularly where litigation over the same patent takes place in more than one jurisdiction. These same events are also studied carefully by institutional investors, lenders and competitors who are not actively participating in the dispute. Accordingly, what the parties say -- and how it's reported -- can have a major impact on share price, investor confidence and market credibility.

In this instance KCI's statement was notably upbeat:

"We are looking forward to the trial in June 2010 where the Court will have the opportunity to fully consider our case," said Stephen D. Seidel, KCI`s General Counsel. "We continue to believe that the Smith & Nephew products infringe our IP and should be enjoined in Australia. The intellectual property rights we hold in Australia and elsewhere enable KCI to bring innovative and efficacious healthcare solutions to patients and caregivers around the world."

But Reuters have an eye to their own credibility as well, not to mention any issue that might arise in terms of detrimental reliance upon its press releases. Accordingly the press release concludes with a lengthy caveat of its own, entitled "Forward-Looking Statements". This message reads as follows:

This press release contains forward-looking statements regarding management`s expectations for the outcome of litigation and the company's future plans for the commercialization of new products. Forward-looking statements may contain words such as believes, expects, anticipates, estimates, projects, intends, should, seeks, future, continue, or the negative of such terms, or other comparable terminology. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Additional risks and factors are identified in KCI's filings with the U.S. Securities Exchange Commission (the SEC), including its Annual Report on Form 10-K for the fiscal year ending December 31, 2008 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, which are available on the SEC's Web site at http://www.sec.gov/. KCI undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise".

Given that the caveat is so much longer and gloomier than the upbeat message it follows, it must be a difficult decision for corporate public relations experts to make as to whether it's better to say nothing at all than to issue a positive statement.

Spain: no mosaic rule in patent cancellation actions.

Ignacio Marqués (Baker & McKenzie, Barcelona) has written to PatLit with news that the dogged pursuit of mosaics may be a thing of the past in Spain. He tells us:

"A recently published judgment of the Audiencia Provincial de Barcelona (Barcelona Court of Appeals) of 15 March 2009 sets clear criteria for how to determine "killing" prior art in patent cancellation actions in Spain.

The claimant grounded its claim on lack of novelty in a "mosaic" of different prior documents by picking out individual technical features from prior documents and assembling them to attack a patent on the grounds of lack of novelty.

According to the terms of the judgment, that was not the right approach. Instead, when assessing the novelty of an invention, the cited prior art has to be examined individually (document by document) and then has to be confronted with the challenged patent. Only then the Court can rightly establish whether each cited document, per se, anticipates the subject matter of the invention. Accordingly the technique of mosaicing different prior documents is not a suitable ground upon which to base a patent cancellation case on the grounds of lack of novelty in Spain.

The Court also stated that the cancellation of the first (and main) claim does not automatically trigger the cancellation of the rest of the subsequent (and ancillary) claims depending of the first one, as the claimant in this action alleged. Even in cases where the first claim is held to be invalid, the Court added, the claimant has to satisfy the burden of providing sound evidence of the lack of novelty of every dependent claim which it intends to cancel. If this procedural requirement is not met, the patent will be partially cancelled (only the first and main claim will perish), while the dependent claims will survive."

IP litigation summit -- coming to a computer near you

PatLit has just received news of a free online webcast summit on “Intellectual Property Litigation” to be held today [not tomorrow!], 8 October. The summit, hosted by BrightTALK, features six presentations from leading IP experts as follows:

“Appealing Beyond the Supreme Court: Patent Reform Legislation”, Jon W. Dudas, Partner at Foley & Lardner LLP and Former Director of the United States Patent & Trademark Office

“Abusive Domain Names: Enforcement Options & ICANN Policy Update”, Mike Rodenbaugh, Principal Attorney at Rodenbaugh Law

“Preventing Licensing Discussions from Escalating to Litigation”, Anthony Sebro, Partner at PCT Companies

“Developing a Winning IP Litigation Strategy in Challenging Times”, Thomas Fleming, Partner at Kaye Scholar LLP

“Six Steps for Managing IP Litigation Costs”, R. David Donoghue, Partner at Holland and Knight

“Does the Sun Shine on Inventive Process? In re Bilski, S.Ct.2009", Mike Molano, Partner at Sheppard, Mullin, Richter & Hampton LLP

You can review the agenda and register for the Intellectual Property Summit here.

Mind the Gap!

PatLit reported last week on a speech by Mr Justice Arnold at the Chartered Institute of Patent Attorneys' Congress on the topic of the cost of patent litigation and the potential reform of the Patents County Court (PCC). As luck would have it, at the very same time, PatLit's Michael Burdon (Olswang LLP) was addressing the same topic in a talk to the UK BioIndustry Association's Annual BioScience Forum.

Michael made the point that, while the proposed reform of the PCC was an admirable measure in catering for the needs of SMEs in relatively low-value cases, there remained a considerable gap between the two alternative court systems (the other being the High Court's more up-market Patents Court). The gap posed a problem for those in the biotechnology industry, who cannot afford the fees and the risk of significant costs awards against them that are part of litigating patents in the Patents Court, but whose dispute would not fall within the relatively modest jurisdictional cap of the reformed PCC.

The IP Advisory Committee of the BIA, of which Michael is a member, has received significant feedback from its members about situations where (i) not only had patent owners been unable to afford the cost of enforcing their own right but also (ii) where companies had reluctantly taken licences in relation to rights which were weak and likely to be revoked under challenge because of the lack of a low-cost forum in which to make such a challenge.

This point is bound to be of interest to the European Commission, whose representatives also spoke at the BIA forum, about the Commission's sector enquiry into pharmaceuticals and the Commission's proposal for a single Community patent and a Unified Patent Litigation System. Access to justice for SMEs and an effective means to challenge patents are key themes of the Commission's work in this area.

Michael paid credit to the efforts made by the current generation of patent judges in applying robust case management and referred to the availability of useful alternatives to litigation such as the opinion service offered by the UK IPO. He also said that the EPO opposition procedure ought to be an effective part of the patent system but that the lengthy delays in having oppositions determined meant that they did not serve their purpose effectively.

Meanwhile we are all twitching with eager anticipation to see whether, if implemented, the reformed PCC, or rather the IPCC as it would be known, will attract much business. Let's hope it is successful and that the cap can be raised to allow it to be used to satisfy, what at least in the biotech industry's expectation, is a significant unmet need. There was much talk at the splendid and lively post-forum drinks party put on by 8 New Square Chambers at the Oxo Tower as to the identity of a possible judge to replace Judge Fysh when he retires in the summer next year. Unfortunately, as several people commented, with a pay scale equivalent to that of a junior associate in a law firm and numerous tales of the "joys" of trying to operate within the County Court structure, there is unlikely to be a long line of interested candidates. Finding someone to take on this crucial role will be critical to the Court's success. Any volunteers?

Patent litigation costs and SMEs: a judge speaks

Speaking at the Chartered Institute of Patent Attorneys' Congress at the Radisson SAS Portman Hotel today, Mr Justice Arnold opened the discussion of the cost of patent litigation, especially for SMEs. Observing that the cost of patent litigation has been a subject of complaint for more than 150 years, he highlighted the fact that SMEs have been perceived as being priced out of not just IP litigation, but litigation in general. This brought him to the subject of the Patents County Court (PCC). Explaining its genesis, he reminded the audience that its first decade was not a success (for reasons which, he felt, it was not necessary to adumbrate). Following the Woolf reforms át the turn of the century, the PCC was effectively operating in the same manner as the Patents Court. While it is generally recognised that its decisions are now more widely respected, the PCC has not been heavily used. This has meant that Judge Fysh QC has had the time to preside over the Copyright Tribunal too.

Left: we're not yet approaching free trials, but substantial costs savings can be made

Turning now to the Jackson Review of civil litigation, Arnold J urged Congress participants to read it, recommending it as a stupendous piece of research. In response to this initiative the Intellectual Property Court Users' Committee Working Group was hastily convened and submitted its recommendations at the end of July (see PatLit here). The renaming of the court as the Intellectual Property County Court, the imposition of strict case management limitations, the absence of standard disclosure and the reduction of demands for evidential material were all mentioned, it being hoped that wherever possible it should be possible for cases to forward solely on the basis of pleadings. Hearings would be held only where necessary, to keep costs down, making use of that ingenious invention, the telephone, where possible. At trial (one to two days) the timetable would be set by the judge, not the parties, and would be split between the parties.

Following the IPO, costs would be on a scale fee basis -- but would be "rather more generous", within a band that reflected the complexity of the matter. Costs would be capped at £50,000 (£25,000 in respect of an account or other financial relief). Cases involving up to £500,000, exclusive of interest, would be heard. Above that, disputes should go to the Patents Court. Arnold J also addressed the transfer of cases between the PCC and the Patents Court, a difficult issue particularly in the early days of the court. Lord Justice Jackson's report is expected by the end of the year, and its recommendations are likely to require both primary and secondary legislation.

Taking questions, Arnold J was asked about the effect of the proposed changes on patent attorney litigators. There are around 70 such people on the register, it appears, but neither he nor Judge Fysh QC had seen many of them in action. "Don't be bashful", he urged those present, You've got the skills and everyone has to start somewhere". It was quite likely that patent attorney advocates would get less of an airing in the new version of the PCC than they get at present in hearings before the IPO.

Other issues raised in the discussion session which followed Arnold J's included the follows:

* the effect of the reforms on the operation of litigation teams;
* litigation that was taking place concurrently in more than one jurisdiction;
* why, if it was possible to run an EPO opposition on a cap of £50,000, it should not be possible to do the same for PCC litigation;
* whether the low level of patent litigation in the UK, which hitherto made the cost and effort of becoming a patent attorney litigator, would be 'cured' by the reform proposals with the result that more such litigators would come forward;
* how much expert evidence is really needed in PCC litigation -- and the different roles played by experts in Patents Court litigation and before the PCC [
* whether the court should appoint its own independent expert to educate the court [while the CPRs probably provide for this already, "It's not done -- and it's best not done", said the judge. Jointly agreed experts are better, particularly for matters like valuation];
* the need for discipline in terms of not raising too many claims and citing too many pieces of prior art.

Alastair Neill Appleyard Lees) then gave an amusing account of his first experience of appearing as a patent attorney before the Chancellor's Court and a brief encounter with a piece of pre-used and still relatively flavoursome chewing gum. Amid laughter and some gentle speculation as to who might follow Judge Fysh on his retirement (no hands were raised when the judge enquired who might be interested), the meeting adjourned with the promise of a trip to the bar.