Monday, 6 October 2014

"Invalid but Infringed?" A paper

"Invalid but Infringed? An Analysis of Germany’s Bifurcated Patent Litigation System", by Katrin Cremers, Fabian Gaessler, Dietmar Harhoff and Christian Helmers (a.k.a. Discussion Paper No. 14-072) is a must-read for anyone who wants to see the results of careful, painstaking research into the effects of handling infringement and validity in different courts within the same jurisdiction.  The authors' conclusions are as follows:
Overall, our results suggest that the German bifurcated patent system favors strongly the patent holder in litigation [It's good to know that the patent holder's investment and efforts are being protected ...]. We show that the bifurcated system creates a substantial number of cases where an invalid patent is held infringed [... but not if it's at the expense of innocent parties whose sole vice is to trespass on non-existent property]. We also provide evidence that fewer patents are challenged than what we would expect based on the consideration of litigation systems where infringement and validity are dealt with jointly. This means that the number of ‘invalid but infringed’ cases is presumably biased downwards due to self-selection [Indeed, a challenge to validity isn't made simply because a patent happens to be invalid but because it stands in the way of the would-be defendant's business plans. If the patent is enforced and invalidity is still some way off, a prudent business decision may involve changing one's business plan]. Our results also indicate that the possibility of facing an injunction for infringing an invalid patent creates legal uncertainty [This is true even in non-bifurcated systems with regard to interim injunctive relief]. We find evidence for such legal uncertainty by looking at changes in firms’ opposition behavior following directly a divergent decision. We find that alleged infringers that were subject to a divergent decision file more oppositions immediately following the court case.

Our results provide empirical support for the criticism that has been directed at bifurcation (Hilty and Lamping, 2011; Münster-Horstkotte, 2012) [This shows that the pro- and anti- debate takes place even in Germany, a significant point for those non-Germans who assume that all Germans are monolithically pro-bifurcation]. Given the probabilistic nature of patents, the strong presumption of validity that is at the core of Germany’s bifurcated enforcement system favors the patentee and creates uncertainty for potential infringers. That said, the problems revealed by our analysis should be compared to possible benefits of bifurcation – in particular, the impact of technically trained judges at the BPatG on validity decisions and the lower costs of litigation due to less need for technical expert witnesses [Though it should be possible to design a non-bifurcated system that makes more use of technically qualified judges and less use of technical expert witnesses, as is mentioned below]. Indeed, the costs of litigation in Germany are remarkably low compared to for example the UK [where this blogger likes to believe that costs have dropped substantially in the wake of better case management and the growth of litigation in the Patents County Court/Intellectual Property Enterprise Court], but technically trained judges could also be incorporated in a court system in which validity and infringement are decided jointly, as is the case in Switzerland (Ann, 2011). It is also possible that reforms that increased case loads at the BPatG and its appeal court, BGH, aggravated the problems during our period of analysis. Regardless, our results suggest that the current system is in danger of overly favoring patent holders. 
One way of addressing the problems highlighted by our analysis could be an acceleration of proceedings at the BPatG, thereby either avoiding the injunction gap altogether or trimming its length. This could allow attaining the benefits of bifurcation while avoiding the uncertainty created by ‘invalid but infringed’ decisions [this would be good]. Alternatively bifurcation could be abandoned altogether. While such a drastic step may look appealing to some observers, its impact would be uncertain. It might for example encourage forum shopping. If courts depend on the number of cases they hear for fee income, prestige, etc. patent holders might find themselves again at an advantage [This blogger feels that judges should be reminded that they should have no interest in fee income and prestige. They are only public servants and in doing their job properly tbey should put all extraneous matters like this aside]. In any case, we do not present a counterfactual analysis that would allow us to evaluate such a drastic step. Our analysis still suggests that bifurcation has considerable drawbacks, at least the way it is currently implemented in the German enforcement system.


Anonymous said...

I suppose that the German and UK patent systems work on slightly different principles. In Germany there must be a higher presumption of validity for bifurcation to make sense. At the UK IPO it's quite easy to get an invalid patent, and there are advantages in having a system where that is the case. Getting protection is not always about enforcing it against others. However with increased harmonisation I suppose its more and more important for validity to be assessed in the same way by patent offices, and so bifurcation also needs to be questioned.

MaxDrei said...

Bear in mind that Germany has two sorts of patents, 20 year patents and 10 year patents. The 10 year ones issue 3 months after you file your application. No examination on the merits at the Patent Office. They are "unexamined rights"

By contrast, the 20 year ones are "examined rights". They have been subjected to all the rigours of Patent Office scrutiny of non-obviousness, so they must be valid, right?

Hence the presumption at German District Court that the asserted claims are not invalid.

And then there's the Federal Patent Court to try validity cases. But there, the so-called "technical judges" are mostly ex-Patent Office Examiners, who still think like Patent Office Examiners. They have never needed to do obviousness objectively like at the EPO, for they can smell when something is obvious, being as how they are themselves persons very senior, very experienced, and very skilled in the art.