Tuesday, 10 November 2009

Patent standards litigation: a judge's view

Attending Day Two of the "Standards and Patents" conference this morning, I was among the international audience of participants drawn from industry, standards organisations and private practice who were privileged to hear Mr Justice Floyd speak on the subject “Patents and Standards: the role of the courts”.

Floyd J explained that patent standards litigation was really a new breed of patent trial. Old-style trials would typically consume 4-5 days, addressing the usual issues of validity and infringement of a single patent. Standards trials were different: the parties are usually litigating over a bundle of patents and are having recourse to the courts because they had failed to agree licence terms; they’re not so much interested in a judgment that stops anyone infringing but, rather, they want the court to weigh their patent portfolio against the portfolios of others.

New issues arise, in particular essentiality: is a particular patent essential to the operation of a standard? From its owner’s view the best patent is the one you have to infringe if you’re going to manufacture, since that's what makes it essential. Another new issue is the assessment of FRAND licensing principles: on what basis are these principles embodied?

The judge related that, in England and Wales, the old Order 15 r 6, relating to declaratory judgments, was a tool that developed considerably over the years. Binding declarations of right might be made under it, regardless of whether other relief may be claimed. After the Woolf Reforms of 2000, the CPR 40.20 is thought to have broadened this rule, providing for declaratory relief regardless of whether any other cause of action is asserted.

Originally it was thought that a party couldn’t seek a declaration if he wasn’t being sued. “But things have moved on”: the judge mentioned what Lord Woolf said in Messier Dowty v Sabena: the courts should not be reluctant to grant declarations if they assist in doing justice (Lord Woolf). The effect of granting a declaration must not however be pointless, like “shouting in an empty room” (to quote the late Sir Nicholas Pumfrey).

Floyd J emphasised that declarations of inessentiality were not the same as declarations of non-infringement, for which there is a statutory basis. There must however be a real dispute between the parties. He then displayed a useful little table which summarised the differences between the declaration of non-infringement and the declaration of inessentiality. In the case of the latter there was no need for a product and process description (PPD) – but there should be an intention to manufacture in accordance with the standard.

Moving on to the litigation between InterDigital and Nokia, the judge observed that 29 InterDigital patents had been reduced to 7 following the exchange of written evidence. InterDigital then advanced no case on three, leaving just four, which included a patent and its divisional. In the event, only one patent was held essential to the standard.

To show how the system can work, Floyd J then gave an example of a paradigm case which should ideally be settled commercially rather than litigated (“Please don’t regard the courts as the first port of call”).

Alluding to case management problems, the judge asked: do we assume that everything will be dealt with at a single trial, or do we break the issues up? “For a judge, having to plough through 35 patents is a nightmare”. He recalled his own experiences: “When I was faced with the first one of these cases, the parties had already agreed a broken-up way of trying it”, in five bite-sized slots. Since it would be intolerable for the experts, counsel and solicitors to be handling all these cases together, the parties agreed, with the judge’s consent, to break the litigation up into two or three teams. Floyd J did not give his blessing to this proposal since, if the toll was too great for the litigants and their advisors, it was far more so for him.

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