Post-revision Lugano: an official map for lawyers

The website of the Official Journal of the European Union carries this morning a 56-page Explanatory Report on the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Lugano Convention of 30 October 2007), prepared by Fausto Pocar (Professor of International Law at the University of Milan). The report has this to say about intellectual property (shorn of footnotes):

"4. Intellectual property rights (Article 22(4))

98. On the subject of the validity of patents, trade marks, designs, or other similar rights required to be deposited or registered, the rule governing jurisdiction is generally the one laid down in the 1988 Convention [the Lugano Convention on jurisdiction and the enforcement of judgments in civil and commercial matters 1988]. Exclusive jurisdiction is conferred on the courts of the State bound by the Convention in whose territory the deposit or registration has been applied for, has taken place or is deemed to have taken place under the terms of an international convention or, as the new wording makes clear, a Community instrument. This last point has been added to remove any doubt about the equivalence of Community law concerning intellectual and industrial property rights with the law of the international conventions in force.

99. Exclusive jurisdiction also applies with respect to patents granted on the basis of the Convention on the grant of European patents, signed in Munich on 5 October 1973. The rule according to which the courts of each State bound by the Convention are to have exclusive jurisdiction in proceedings concerned with the registration or validity of any European patent granted for that State, without prejudice to the jurisdiction of the European Patent Office, which was contained in Article Vd of Protocol 1 to the 1988 Convention, has now been incorporated into Article 22(4). The last part of the provision as it stood in the Protocol has been omitted: it made an exception to the exclusive jurisdiction of the courts of the States bound by the Convention where the patent was a Community patent under Article 86 of the Convention for the European patent for the common market, signed in Luxembourg on 15 December 1975.

The Luxembourg Convention, amended by a subsequent Agreement relating to Community patents signed in Luxembourg on 15 December 1989, provided for the grant of a Community patent similar to national patents, but independent of them and with equivalent effects in all Contracting States. It declared the Brussels Convention to be applicable to all actions concerning Community patents, while establishing a special jurisdiction for disputes concerning validity and infringement. The Luxembourg Convention never came into force, and no reference has been made to it in the new Lugano Convention.

100. The question of an exception to the exclusive jurisdiction conferred by Article 22(4) on the courts of the Member States has remained a live issue, however, as a result of efforts to pursue the creation of a Community patent by means of Community legislation; the Commission presented a proposal for a Council Regulation on the Community patent in 2000, followed by the Commission’s 2003 proposals for a Council Decision conferring jurisdiction on the Court of Justice in disputes relating to the Community patent and a Council Decision establishing the Community Patent Court and concerning appeals before the Court of First Instance. The general approach is to give broad jurisdiction to the Court of Justice, more especially in disputes concerning infringement, including declarations of non-infringement, disputes concerning the validity of a Community patent, whether challenged in the main action or by way of counter-claim, and disputes concerning the use of the invention after publication of the Community patent application or regarding rights based on prior use of the invention, with exclusive jurisdiction to order provisional measures in cases within these areas, leaving the courts of the States with exclusive jurisdiction under Article 22(4) only in cases not expressly reserved to the
Community court.

101. The diplomatic conference held from 10 to 12 October 2006 discussed whether it would be advisable to append to the Lugano Convention a protocol conferring exclusive jurisdiction on the Court of Justice in matters of Community industrial property rights. Such a protocol would have the advantage of assigning to a single court disputes on the validity of patents and disputes on infringement, which under the Lugano Convention would otherwise have to be brought before different courts. But against the proposed protocol it was argued that it did not circumscribe the disputes concerned with sufficient precision, leaving their definition to Community legislation to be enacted later, and that to include actions for infringement was a major departure from the rules of jurisdiction in the Lugano Convention and would compromise its overall harmony. It proved impossible to arrive at a satisfactory formulation, and the diplomatic conference consequently preferred to defer consideration of such a protocol to a later date, when a Regulation on the Community patent had been adopted.

102. The protocol conferring exclusive jurisdiction on the Court of Justice in industrial property matters drew attention to certain needs which have in fact been at least partially satisfied by the subsequent case-law of the Court of Justice: before the signature of the new Convention, the Court found itself called upon to decide the question whether the rule of exclusive jurisdiction over registration or validity of a patent applied irrespective of whether the issue was raised by way of an action or a plea in objection. The Court held that it did: in the light of the position and objective of the provision within the scheme of the Brussels Convention, the view had to be taken that the courts of the State of registration of the patent had exclusive jurisdiction ‘whatever the form of proceedings in which the issue of a patent’s validity is raised, be it by way of an action or a plea in objection, at the time the case is brought or at a later stage in the proceedings’. The Court of Justice thus held that where an action was brought for infringement, the court seised could not find indirectly that the patent at issue was invalid, even if the effects of the judgment were limited to the parties to the proceedings, as happened under the national laws of some of the States bound by the Convention.

In view of that precedent, a court called upon to hear an action for infringement of a patent in which the question arises whether the patent is valid must, unless it has exclusive jurisdiction to decide the validity of the patent under Article 22(4), of its own motion declare that it lacks jurisdiction to determine the point under Article 25 of the Convention; and depending on the procedures allowed by the national law applicable, it may have to suspend the infringement proceedings, pending judgment by the court with exclusive jurisdiction, before reaching a decision on the substance. Consequently, the wording of Article 22(4) of the new Convention was modified compared both to the corresponding provision in the 1988 Lugano Convention and Article 22(4) of the Brussels I Regulation, in order to incorporate the GAT ruling of the Court of Justice [judgment here; short note here].

The position adopted by the Court of Justice largely satisfies the intended purposes of the proposal for a protocol on the exclusive jurisdiction of the Court of Justice, by requiring a single exclusive jurisdiction for actions challenging validity or alleging infringement, which prevents rulings on the validity of a patent from being delivered by more than one court, even if they are considering quite different aspects of the matter, and thus avoids the danger of conflicting decisions. If the European Community were to adopt a Regulation on the issue of a Community patent, and to confer exclusive jurisdiction over the registration and validity of patents on the Court of Justice, a court of a State bound by the Convention which was called upon to hear an action for infringement of a Community patent could not rule even indirectly on the validity of the patent, and for that question would have to recognise the exclusive jurisdiction of the Court of Justice, and treat that court as it would another national court".

This report was commissioned in order to consider all of the provisions of the Lugano Convention in the light of the judicial precedents not only regarding the preceding Convention but also the substantially-identical Brussels I Regulation. The report does not in any way reflect the position of the States or of the Community with regard to Brussels I and the absence of an explanatory report on Brussels I does not mean that this report is intended to fill any supposed gap:

"In other words, the present report is not intended to offer clarification of the Regulation, or to give indications as to its interpretation or the application of the rules it lays down: its sole purpose is to explain the rules of the Lugano Convention as they stand after revision".

PatLit is unsure of the legal status of this document and does not know the extent to which it might be considered authoritative, influential or binding in legal proceedings.

Injunction granted in i4i dispute over XML patent

NOTE: the judgment in the case discussed below can now be accessed here.

According to breaking news in Times Online, software company Microsoft has been barred by the US Federal Circuit Court from selling its word processing Word software in the United States and must pay US$290 million in damges for infringing a patent held by a small Canadian software company, i4i (for earlier developments in this trial see the AmeriKat posts on the IPKat weblog here, here, here and here). Says Times Online,

"The ruling ... prevents Microsoft from selling any versions of Word 2003 or Word 2007 after January 11 2010. Copies of these products sold before this date are not affected.

Loudon Owen, Chairman of i4i, described the ruling as “a war cry for talented inventors whose patents are infringed”... Mr Owen said that the XML feature at the heart of the dispute was an important tool for users such as drugs companies who routinely handled large amounts of data.

By removing it from its Word 2007 software Microsoft would disadvantage those users. ... He did not rule out licensing the XML feature to Microsoft. "They know where to find us if they want to talk," he said.

In court documents filed during its long-running dispute with i4i, Microsoft had originally claimed that a ban on sales “will inflict irreparable harm on Microsoft by potentially keeping the centerpiece of its product line out of the market for months."

But yesterday the company brushed off the ruling, saying that it had already “put the wheels in motion” to remove the disputed feature from its products.

“We expect to have copies of Microsoft Word 2007 and Office 2007, with this feature removed, available for US sale and distribution by the injunction date,” Kevin Kutz, Microsoft’s director of public affairs, said.

He added that the beta versions of Microsoft Word 2010 and Microsoft Office 2010, which are available now for downloading, do not contain the technology covered by the injunction.

The ruling follows an earlier injunction issued by a US disctict court in Texas barring Microsoft from selling recent versions if its Word software, after the company was found to have wilfully infringed a patent held by i4i, a Toronto-based technology company, through the use of a technology used to classify documents for retrieval by computers.

That injunction was stayed while Microsoft appealed.

In the latest ruling, the three-judge panel said: "A small company was practicing its patent, only to suffer a loss of market share, brand recognition, and customer goodwill as the result of the defendant's infringing acts."

It noted that the “district court found that Microsoft captured 80 percent of the custom XML market with its infringing Word products, forcing i4i to change its business strategy." ...".

Microsoft is said to be considering applying for a rehearing or an appeal to the US Supreme Court.

What is interesting here is that, following the earlier ruling of the US Supreme Court in eBay v MercExchange (here, noted by the IPKat here), many commentators felt that the loss of what was regarded as an automatic entitlement to injunctive relief would cripple patent owners. This decision has shown that this is unlikely to be so and that, at least where the defendant has a good chance of amending its product within a reasonable time so as to avoid infringement, an injunctive order will certainly be an option for the court in the exercise of its discretion.

"Glad" and "comforted" by German decision -- but don't cite anyone else's!

Friday's ruling of the Court of Appeal for England and Wales in Dr Reddy’s Laboratories (UK) Limited v Eli Lilly and Company Limited [2009] EWCA Civ 1362 doesn't seem to have made it on to BAILII yet, and PatLit wonders whether this will remain the case till after the Christmas break. Accordingly this blog is hosting the judgment here for the convenience of its readers. The substantive patent aspects of this decision, dismissing Dr Reddy's appeal against the refusal of Mr Justice Floyd to revoke Lilly's Olanzapine patent for psychotic disorders will doubtless be covered elsewhere. This blog is just picking up one small item for now: the subject of the citation of foreign judgments in the courts of England and Wales. Lord Justice Jacob said this:

"Foreign Decisions

79. We were provided with two thick bundles of decisions about the corresponding patent in a host of jurisdictions (the US, Canada, the Czech Republic, Finland, Romania, Slovakia, Slovenia, Spain, China and Hungary). In some countries there was more than one decision.

80. I did not find this all that helpful. Mr Carr invited us particularly to follow the Canadian decisions (where the patent was held invalid) and in particular the decision of Hughes J of June 5th 2007. He essentially followed the IG approach in saying that the Patent had to disclose an advantage over the prior art. It does not seem he was shown the EPO case law (why should he have been?). It does not seem that he was invited to consider patentability on the basis of whether the Patent disclosed real advantages over what was actually known. So I decline Mr Carr’s suggestion.

81. I do not find it necessary to refer to any of the other decisions, save for that of the German Supreme Court (the Bundesgerichthof) of 16th December 2008, which I have mentioned briefly already. The Court held the Patent valid. All the arguments before us were available to be considered, although only some were considered explicitly. The Bundespatentsgericht had held the patent anticipated over Chakrabarti 1980 (a point not run here). The BGH rejected both anticipation and obviousness over 235, pithily but essentially for the same reasons as Floyd J did and we do. They had an expert who said that there was no reason to pick olanzapine out of the vast prior class and that was enough both for novelty and non-obviousness. And they rejected in some more detail obviousness over Chakrabarti 1980.

82. We of course are not bound by a decision of another national court. And indeed it is quite possible for national courts applying the same law to come to different conclusions because the evidence is different. So I say no more than that I am glad we reach the same decision as the BGH. It is an example of the fact that, by and large, different courts in Europe do reach the same conclusions – even though, perhaps understandably, the rarer cases where they differ get more publicity".

Jacob LJ's sentiment regarding the German citation was quietly echoed by the Master of the Rolls:

"118. I should add that I draw comfort in reaching this conclusion from the fact that in Germany both the Oberlandsgericht, determining infringement in the decision I have mentioned in paragraph [23], and the Bundesgerichthof, determining validity on appeal from the Bundespatentgericht, reached the same conclusion, namely that the Patent was valid".

CEIPI announces European patent court conference

The Centre d'Etudes Internationales de la Propriété Intellectuelle (CEIPI), Strasbourg, is organising a conference, "Towards a European Patent Court", on April 16 and 17, 2010. Hosted in the European Parliament Building, Strasbourg, the event is likely to be a well-attended one. Further information (though as yet there's not much of it) is available here.

Inequitable conduct and US patent litigation

'Defusing the “Atomic Bomb” of Patent Litigation: Avoiding and Defending Against Allegations of Inequitable Conduct After McKesson et al.' is the title of an article by Pofessor Sean M. O'Connor in the just-published latest issue of the John Marshall Review of Intellectual Property Law (citation: 9 J. Marshall Rev. Intell. Prop. L. 330 (2009)).

According to the abstract,

"The doctrine of inequitable conduct in patent law has a long and vexing history. While it is sometimes mistakenly conflated with the United States Patent and Trademark Office’s Rule 56, the doctrine is actually a purely equitable one established by the Supreme Court in 1945—and not revisited by it since then. This Article re-establishes the roots and proper context of the doctrine, while tracing its confused interactions with Rule 56 over the ensuing decades.

The Article reaffirms the necessary balancing act between over and under disclosure of references during patent prosecution, and the inverse sliding scale relationship of materiality and intent to deceive for courts’ invocation of the doctrine as a patent litigation defense rendering the patent unenforceable. It concludes by proposing a “damages-at-law only” litigation tactic by patent owners to preclude the use of the doctrine by defendants".

The full text of this article may be read here.

New blog on the block!

PatLit sends its warmest wishes to the EPLAW Patent Blog, which went live yesterday. To explain briefly,

"EPLAW was formed in the year 2001 as a non-profit making corporation with a view to promote the equitable and efficacious handling of patent disputes in Europe and to strengthen the links between lawyers having relevant litigious experience in patent law in Europe.

Members of the Association must be lawyers admitted to a bar or similar law society in a country in the European Economic Area and Switzerland and have substantial litigation experience in patent law".

The Blog has an archive that stretches back to January 2009 and it's internally searchable. Its Editorial Board consists of 33 members drawn from 11 jurisdictions, under the editorial baton of Annette Hirschfeld (Tilburg University). Readers may wish to note that it's sponsored and carries advertising. You can view the EPLAW Patent Blog here.

ITC gets the thumbs-up

The December 2009/January 2010 issue of Patent World, published ten times a year by Informa, carries an article, "International Trade Commission exclusion orders" by two Kilpatrick Stockton attorneys, Chris Murphy (Washington DC) and Wilson White (Atlanta). The authors review ITC's practice regarding orders made under section 337 of the Tariff Act 1930 ewhich empowers the ITC to exclude articles from import if they are found to infringe a valid US intellectual property right by either a general exclusion order or a limited exclusion order.

The article concludes that the ITC "provides a forum for fast and efficient resolution of intellectual property disputes and enjoys the reputation for providing remedies tailored to protect both the rights of IP owners and the public interest in unrestricted trade" even though recent developments in the Kyocera and Tessera cases have probably diminished its appeal as a forum.

Patent World's home page can be visited here. PatLit team member Michael Burdon is on the journal's editorial board.

Barcelona court cites EPO decisions for the first time

Ignacio Marqués, from Baker & McKenzie's Barcelona office, has written to tell PatLit about a recent decision of the Court of Appeals of Barcelona (IP Section), which has applied EPO case law in order to decide on the novelty of Spanish inventions. Says Ignacio:

"It has become customary for the Audiencia Provincial de Barcelona (Barcelona Court of Appeals – the first specialised IP Court in Spain) to apply the European Patent Convention in patent cases. This time however, a recently published judgment of the Audiencia dated 5 May 2009 goes a step further by elaborating on the novelty requirement by citing (and applying) the doctrine emanating from the EPO’s Board of Appeals.

In order to assess the validity of a Spanish patent, the Court applied Articles 9.2 (“implicit features or well-known equivalents”) and 9.6 (“implicit disclosure and parameters”) of the Guidelines for Examination in the EPO, which is no longer an exotic piece of literature for patent litigators in Spain. The Court then stated that, when assessing the novelty requirement in the course of a Spanish patent/utility model cancellation action, the Court must apply the “explicit” and “implicit” novelty doctrine as developed by the EPO’s Boards of Appeal in Decisions T 12/81, T 140/94, T 658/92, T 793/93 and T 101/98.

According to the reported Judgment, a patent will be anticipated if it is shown to be derived implicitly ofrom a prior publication, provided that an “expert skilled in the art” would inevitably reach the invention as described in the prior publication (even though the patented invention is not explicitly mentioned in the prior publication)."

Thanks, Ignacio -- we really appreciate your effort to keep our readers informed.

German, but looking to be more American?

Last night's PatLit seminar, "Patent litigation in the US and Japan: what's the difference?", provided some fascinating insights into the Japanese approach to patent litigation. Our speaker Professor Toshiko Takenaka (Associate Director, Graduate Program in Intellectual Property Law and Policy Director, CASRIP), portrayed Japan as a country which, while operating a German-based civil law tradition, sought to graft on some of features of US law which evolved from its case-law jurisprudence. She also explained how, on account of its rapid industrialisation, Japan continued to view itself as a developing nation long after it had become a sophisticated industrial and technological power-house. With some minor qualifications, strong parallels could be drawn between the emergence of Japan as a patent-based jurisdiction two decades ago with the position of China today.

The seminar became quite participative at the point at which discovery (or 'disclosure' as we Brits must now call it), burden of proof and heads of damages were discussed. Comparing US and EU infringement remedies, Professor Takenaka raised the question whether the US law on damages was TRIPS-compliant, which left me wondering why so few UK intellectual property practitioners ever get sufficiently excited by TRIPS to read it.

Other features of the seminar included some very pleasant mince pies provided by the seminar hosts Olswang LLP (thank you!) and a raffle for the copy of Professor Takenaka's Patent Law and Theory: a Handbook of Contemporary Research (Edward Elgar Publishing, 2009), kindly provided by the publisher.

Professor Takenaka's PowerPoints, which go considerably beyond the scope of her talk last night, are available here.

Patent litigation insurance: good for the defendant, better for the insurer

"Controlling The Costs Of Intellectual Property Litigation", an article by Sanford E. Warren Jr. of Akin Gump Strauss Hauer & Feld LLP, was published yesterday in The Metropolitan Corporate Counsel (here). It raises some familiar issues and points to substantial escalation in the cost of litigating patents and other IP rights in the United States:

"In 2009, the cost of the average patent lawsuit, which was $5,000,000 in 2007, rose to $5,500,000. The increased cost of patent litigation was indicative of the overall trend in intellectual property (IP) litigation. Across the board, the cost of IP litigation has risen substantially in recent years. Since 2001, the cost of patent, trademark and copyright lawsuits has risen 48 percent, 38 percent and 73 percent respectively. And with estimates showing the cost of IP litigation rising at almost 20 percent a year, there is no indication that the trend of rising costs will end anytime soon".

After reviewing the steps that might be taken to avoid litigation and the development of a sensible litigation strategy, Warren turns to insurance policies, about which he sayss:

" ... The policy language itself is the most important factor in determining coverage. Courts will not go outside the plain meaning of the language in the policy to provide relief for the insured. For example, in Discover Fin. Servs. v. Nat'l Union , 527 F. Supp. 2d 806 (N.D. Ill. 2007) (applying Illinois law), the court granted summary judgment for an insurer, finding that it did not have a duty to defend the insured in its patent infringement action. Despite the insured's attempt to redefine the claims through interrogatories, the court held that the insured's claims did not qualify for coverage.

Traditionally, companies have relied solely on the CGL [= commercial general liability] policy to cover their business risks, but as the insurance industry has adjusted to avoid providing protection for newly evolved risks, like IP litigation, companies should consider purchasing specialized insurance policies to ensure coverage, where and if available".

While insurance policies, and the manner in which they are interpreted, may change from jurisdiction to jurisdiction, the thing that remains constant is the factor which both unites and divides insurer and insured -- neither wants to have to pay out. The insured is always in a stronger position than the insured in that it both calculates the odds and fixes the premiums, while it may be able to reduce or escape liability to pay where the insured is successful or where the construction of the policy terms works in its favour. This is why there's a strong argument in favour of groups of businesses within a specific sector clubbing together to evaluate their own risks, set their own rates and give guidance as to how their terms might be applied or construed.