UPLS: "We will fight them on the beaches ..."

The Court of Justice of the European Union has received submissions in Opinion 1/09 Unified patent litigation system. In this Report for the Hearing, almost all possibilities regarding the legality of the proposed unified patent litigation system are contemplated:

"16 The observations submitted argue one of the following: (i) that the request for an opinion is inadmissible or (ii) that the draft agreement is incompatible with the Treaty [establishing the European Community] or (iii) that it is necessary to make amendments to the draft agreement in order to ensure its conformity with the Treaty or (iv) that the draft agreement is compatible with the Treaty".

This document, outlining the views of the those submitting them, is 35 pages long. More or less half of its length is taken up with those who maintain that the draft agreement is compatible with the Treaty. You can browse it for yourself here. For the record, those who consider the proposal okay from the word "go" include the jurisdictions which already handle the most patent litigation and which, in the opinions of some, may have the most to lose from the Europeanisation and consequent dilution of their special talent and experience for patent litigation: Germany, the Netherlands and the United Kingdom. Those who consider the proposal incompatible with the Treaty include Greece, Spain, Cyprus and Italy -- where the Union's best and most beautiful beaches are to be found.

Pharma pay-for-delay OK?

Bound by precedent, last month a U.S. Court of Appeals (2d Cir. E.D.N.Y.) panel decided in In re Ciprofloxacin Antitrust Litigation that Bayer AG and several generic drug makers did not violate antitrust laws when they agreed to a reverse exclusionary payment -- or "pay-for-delay" -- settling a patent infringement suit. However, seemingly unhappy with its own decision, the panel encouraged plaintiffs to request re-examination of the case before the full court, in order to address public interest concerns.

In the original infringement suit, generic drug makers (including Barr Laboratories, The Rugby Group, and Watson Pharmaceuticals) had filed Abbreviated New Drug Applications (ANDAs), in order to obtain federal approval to sell generic versions of Bayer's patented antibiotic ciprofloxacin ("Cipro"). Bayer then sued to prevent such approval. As so often happens, Bayer and the generics settled the case with a pay-for-delay arrangement in which Bayer agreed to give Barr more than $398 million in exchange for the generics' promise to delay introduction of generic versions of Cipro. In response, several trade unions and pharmacies slapped Bayer and the generics with over 30 antitrust lawsuits, which the New York trial court consolidated and eventually dismissed in favor of defendants. Citing In re Tamoxifen Citrate Antitrust Litigation, the District Court ruled that pay-for-delay did not violate antitrust laws, and explained,

"The ultimate question ... is not whether Bayer and Barr had the power to adversely affect competition for ciprofloxacin as a whole, but whether any adverse effects on competition stemming from the Agreements were outside the exclusionary zone of the '444 Patent. It goes without saying that patents have adverse effects on competition. However, any adverse effects within the scope of a patent cannot be redressed by antitrust law." (emphasis added)

Interestingly, this case showcases a conflict between the Federal Trade Commission, which views reverse payment agreements as per se illegal, and the courts' more pragmatic approach. At present, Tamoxifen remains judicially binding; unless a patent or its enforcement is fraudulent or "baseless," then no antitrust laws are broken -- "as long as competition is restrained only within the scope of the patent." 

The panel declared itself unable to review plaintiffs' additional argument that reverse-payment agreements violate public policy by depriving consumers of lower-cost generic drugs. Notably, the U.S. government filed an amicus brief urging the Court to overturn Tamoxifen and deem pay-for-delay settlements presumptively illegal, on public interest grounds. Apparently somewhat swayed, the panel suggested:

"[W]e believe there are compelling reasons to revisit Tamoxifen with the benefit of the full Court's consideration of the difficult questions at issue and the important interests at stake. We therefore invite the plaintiffs-appellants to petition for rehearing in banc."

A tale of trolls and false clouds

PatLit has never been particularly happy about the use of the term 'patent troll' to describe a patent proprietor who, while not manufacturing anything himself, seeks to enforce a patent by collecting a rent for its use by others, backed by the threat of injunctive relief to prevent the non-payer continuing to manufacture. The term 'patent troll' is imprecise, judgmental and, in its widest form, broad enough to include such worthy enterprises as university research institutions and their commercialisation offices. Perhaps for this reason the expression, despite its power as a vivid metaphor, has been decreasingly used -- at least on my side of the Atlantic -- and appears to be yielding on both sides of the Pond to the curious terminology 'non-practising entity' or 'NPE'

Proof that 'patent troll' has assumed a Pythonesque dimension of silliness may be found in the recent news (reported here on pcworld.com but also in many places elsewhere) that Salesforce.com Chairman and CEO Marc Benioff has bestowed the title 'patent troll' on software giant Microsoft. Says the article,

"Last week, Microsoft sued Salesforce.com, alleging that the company infringed nine of its patents. The suit -- a rare example of Microsoft using the courts to defend its patent portfolio -- covers several broad patents, including one for a system used to display a Web page with embedded menus. Another patent covered by the suit covers a method for stacking toolbars in a computer display.

... [Saleforce.com chairman and CEO Marc] Benioff declined to comment on specifics of the suit, but reiterated his description of Microsoft as a patent troll.

"Patent trolls are part of the industry today, that's just the way it is. We've dealt with them before and we'll deal with this situation in the same exact way," Benioff said, noting that the Microsoft lawsuit would have no material impact on the company.

... Benioff repeatedly mocked Microsoft, describing the company's products as old technology that's out of sync with the emergence of cloud computing, a catch-all term used to describe IT infrastructure and applications delivered as a service over the Internet. ... earlier ... Benioff questioned Microsoft's recent release of a new version of its Office productivity suite, which includes a free Web version. The Web version of Office 2010 is Microsoft's attempt to add cloud-computing capabilities to its productivity suite, but Benioff said it falls short.

"It's a false cloud," he said".

Original Syn

In what some have characterized as the first step toward a "new industrial revolution," American scientists have created a synthetic genome -- resulting in the first man-made, self-reproducing, living cell.

The J. Craig Venter Institute (JCVI) has synthesized a genome from scratch in a laboratory and applied for patents on both the genome and the resulting organism. Dr. Venter, JCVI's chief executive officer, led the '90s-era race to map the human genome. This time around, his research team sequenced the genetic code of a bacterium (M. gen­i­tal­ium), and then used computer data and "four bottles of chemicals" to construct a copy from scratch. The new, synthetic genome M. mycoides -- dubbed "Synthia" by the watchdog organization ETC Group -- was then inserted into the cell of an existing bacterium. Subsequently, the host cell "booted up" with the Synthia genome and began producing Synthia's synthetic proteins, instead of its own.

Having partially funded JCVI's research, the U.S. government's Department of Energy holds "certain rights" to the Venter Institute's US Patent application no. 20070122826 and international patent application WIPO no. WO2007047148, the latter application seeking monopoly rights in more than 100 countries. JCVI has proposed using artificial life forms to devour greenhouse gases, create new chemicals and food ingredients, clean up water, and accelerate vaccine production. Venter insists that his team has participated in White House-level bioethical reviews, and is "being thoughtful" about the implications of their work.

But watchdog organizations warn of Synthia's potential dangers, including unintended biological consequences and military or terrorist misuse. The ETC Group has challenged JCVI's patent on ethical and public safety grounds, and also complains: “Ven­ter’s en­ter­prises are po­si­tion­ing them­selves to be the Mi­crosoft of syn­thet­ic bi­ol­o­gy.” ETC previously won a 13-year challenge to a Monsanto soybean patent. Nonetheless, their present challenge looks less promising, since JCVI's Synthia research was backed by such heavyweights as the U.S. government, BP, and Exxon Mobil.

Since Diamond v. Chakrabarty courts have restricted the ability to patent life forms, by excluding naturally-occurring organisms from such monopoly rights. Synthia presents a major game-changer; Venter's success may give biotech companies the means to circumvent these restrictions by simply creating synthetic versions of organisms. This could have far-reaching effects on Myriad, patent law, and our collective perceptions and definitions of "life."

Ricoh undercuts NPE profit potential

If other U.S. courts follow the lead of Wisconsin District Court Judge Barbara Crabb, NPEs (non-practicing entities, or "patent trolls") may soon see an end to their massive settlement winnings. Last month, office equipment manufacturer Ricoh won an infringement action against Taiwanese company Quanta Computer. But Crabb rejected Ricoh's request for an injunction to prevent Quanta from selling the patented optical drives at the heart of the suit. Pointing to eBay (547 U.S. 388 (2006)), the judge diverged from traditions of presumptive injunctive relief in cases of patent infringement cases, and instead appeared to establish certain criteria for distinguishing among types of patent holders. Such criteria seemed intended as a direct hit against NPEs.

Crabb was unpersuaded that Ricoh would suffer irreparable harm if an injunction did not issue. To justify this analysis, she relied on the eBay concurring opinion:

"When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest."

This language appears to specifically target NPEs; Judge Crabb explicitly contrasted such "entities" with researchers, independent inventors, and direct market competitors -- the latter classes apparently being more deserving of injunctive relief against infringers. Because Ricoh does not manufacture or sell the patented optical disc drive, Crabb reasoned that the plaintiff was not Quanta's direct competitor, and thus would not suffer irreparable harm in the absence of an injunction.

But she also turned an eye to the plaintiff's intent; since Ricoh had previously licensed its patent to numerous companies, Crabb decided that Ricoh's main motive was not "to narrowly limit the practice of its invention," but was rather to "simply maximize a potential licensing fee." And: "[b]ecause that is not an adequate ground for an injunction, plaintiff’s motion for a permanent injunction will be denied." The parties were ordered to negotiate a compulsory license for future use.

This policy-based decision may be one court's way of addressing the U.S. Congress's failure to heed the pleas of large companies and end the plague of the "patent trolls." It does remove one bargaining chip from the NPEs' stable of tricks. By hitting NPEs where it hurts -- in their pocketbooks -- the court may well accomplish what Congress never could.

Read the decision here.

Perini appeals dismissed

In August 2009 PatLit asked "When do you sue a holding company?", the question being as to the circumstances -- if any -- in which one should join as a defendant in patent infringement proceedings a company whose only involvement is that it is the holding company for another company which purchased infringing goods from the principal defendant. In the opinion of Mr Justice Floyd (Patents Court, England and Wales) in Fabio Perini SPA v LPC Group Plc & others [2009] EWHC 1929 (Pat), the holding company should not have been joined: the case against it was based only on the fact that the letter from the patent owner (Perini) before action, addressed to LPC Limited (its subsidiary which purchased the infringing goods from the principal defendant, PCMC) elicited a response on LPC Group's notepaper which affirmed "We purchased the equipment from PCMC".

Last Friday, in [2010] EWCA Civ 525, the Court of Appeal dismissed both the appeal and the cross-appeal and affirmed the position taken by the trial judge. Many issues were discussed in the 125 paragraph leading judgment of Lord Neuberger MR -- but this issue was not one of them.

Interim injunctive relief in Spain

Writing for International Law Office earlier this week ("Novartis's endeavours to obtain interim injunctions come to naught"), Sara Pelaz (Grau & Angelo) explains what happened last December when pharma company Novartis applied for an interim injunction against Medis EHF, Laboratorios Stada, SL and ratiopharm España, SA alleging infringement of its EP948320 patent on pharmaceutical compositions for the sustained release of fluvastatin, a patent which was amended during EPO opposition proceedings.

As the title of the article indicates, Novartis failed. The saga is an interesting one, since it deals with the curious situation in which a plaintiff relies on patent claims which appear to be in constant flux as the patent passes from the Opposition Division to the Board of Appeal, where the patentee requests that issues be remitted to the Opposition Division following the submission of fresh documents and the joinder of further parties in the EPO proceedings. Defendants often appear to present a moving target; less often can the same be said of the plaintiff's patent.

Infringement action won't be stayed pending foreign decision in non-patent claim

Stay of proceedings is always an important issue where litigation breaks out between the same parties in different jurisdictions in respect of the same patent -- but it's not so common to find an application for a stay of patent infringement proceedings in the UK pending the outcome of proceedings unrelated to patent infringement abroad. For this reason the extempore decision of Mr Justice Kitchin in Elmotech Ltd and another v Guidance Ltd and another (Patents Court, England and Wales, 13 May 2010) is instructive (this decision was picked up by subscription service Lawtel).

In these proceedings Guidance applied to stay an infringement action brought against them by Elmotech in relation to its patent for tracking devices, pending the outcome of related French proceedings. In those French proceedings, Elmotech had challenged the award of a state tender to a consortium, which included the second applicant in these proceedings, to supply personal monitoring equipment in France. Elmotech, as a member of a consortium that had made an unsuccessful bid, claimed that the award of that tender and the subsequent contract signed by the parties should be set aside because of the procedural violations of EU law and French procurement contract rules. Elmotech, opposing the application for the stay, maintained that it was likely to take around four and a half years to resolve the French proceedings and to receive any relief if it was successful. The French proceedings did not involve any allegations of infringement of patent rights or any issue as to the validity of any patent rights.

Kitchin J refused the application for a stay. In his view, in these circumstances it would not be right to deprive Elmotech of the opportunity to establish the validity of its patent in suit; rather, it was appropriate to allow the patent infringement action to proceed.

Hearing next week on UPLS

According to the Newsletter -- Court of Justice of the European Union, next Tuesday, 18 May at 9:00am the Court of Justice is holding its Hearing in Opinion 1/09 on the compatibility with European Union law of the Unified European Patent litigation system (on which see, eg here and here):

"The Council has requested an opinion from the Court of Justice regarding the compatibility of a proposed agreement creating a European and Community Patents Court with the EC Treaty. The draft international agreement would be concluded between Member States, the European Union and the non-EU Member States of the European Patent Office and will have jurisdiction in respect of European and Community patents.

This special "Opinion" procedure, provided for by Article 300(6) of the EC Treaty (not to be confused with an Advocate General's Opinion), exists to allow the EU's institutions to seek advice from the Court of Justice about the compatibility of an international agreement with EU law before signing it (to avoid the EU entering into a treaty which is subsequently declared illegal by the Court). One of the specificities of this procedure is that it will be heard by the entire court (all 27 Judges and 8 Advocates General). At the hearing, the Court will hear the submissions of various EU institutions and Member States".

Thank you, Chris Stothers (Arnold & Porter), for spotting this.

Where to sue and be sued in the US: some real research

Thank you, Natalie Nathon, for news of this draft article which has recently been posted on the SSRN website, Mark A. Lemley's "Where to File Your Patent Case" (April 29, 2010). This 39-page document is replete with data concerning US patent trials. Says the author, a Stanford-based professor, in his abstract:

"Patent lawyers spend a great deal of time figuring out the best districts in which to file patent cases. Based on a comprehensive study of all patent lawsuits over the past ten years, I identify the best – and worst – districts for patent owners along a variety of metrics. The answers will surprise you".

The conclusions are indeed quite gripping, even for non-Americans. Says the author:

"The results, in short, seem fairly stable across a variety of likely preferences. And they reflect received wisdom only in part. Accused infringers should be trying to litigate in the Eastern District of Wisconsin, the Southern District of Ohio, or the District of Columbia, none of which are much on the radar screen of patent lawyers. Patentees should be suing in a variety of districts, including the District of Delaware, the Eastern District of Virginia, and the Western District of Wisconsin. Virginia and Wisconsin aren’t much of a surprise, but patent lawyers seem to overvalue the Eastern District of Texas and undervalue the District of Delaware. ..."