Report on possible amendments to UK law to accommodate new Unified Patent Court: little to report

It's a rather technical document, but it's quite short and it's definitely about patent litigation: published by the United Kingdom's Intellectual Property Office, it's called Technical Review and Call for Evidence: Summary of Responses. In short,

The Intellectual Property Office consulted on proposed changes to the Patents Act 1977 to introduce the Unified Patent Court (UPC) and the Unitary Patent between 10 June 2014 and 2 September 2014.

The Government received twenty responses to the Technical Review and Call for Evidence. These came from businesses which may own patents or use patented inventions, legal firms and patent attorney practices, and also some organisations representing particular business/technology sectors. Responses went into varying levels of detail, with some looking at the fine detail of the proposed legislation, and also those which looked at high level principles. Different sectors had different concerns and priorities.

You can read the document here.  If you don't want to read it, or haven't the time, don't worry: there will not be any legislative proposals springing out of it before the UK government has published its own formal Response document -- for which there is as yet no projected publication date.

What's interesting is the very small number of interested parties making responses, listed on page 7. Whether this is a result of poor publicity for the consultation process, apathy or people simply being too busy, it's a disappointing and does send out something of a message that most people aren't particularly concerned.

Congress to Consider Alternative Patent Litigation Reform Bill

Last month, the so-called “Innovation Act of 2015” (H.R. 9) was introduced in the U.S. House of Representatives. That bill proposed several reforms of the patent system, including restrictions on patent litigation such as a partial “loser pays” provision for infringement cases. We reviewed some of those proposed changes HERE.

The Innovation Act has triggered concern in some quarters that it might go too far in limiting patent enforcement rights, especially in light the popularity of inter partes review proceedings under Leahy-Smith America Invents Act (“AIA”) and recent Supreme Court cases generally viewed as favoring defendants.

Last week, three senators introduced an alternative reform bill, named the “Support Technology and Research for Our Nation’s Growth (i.e., ‘STRONG’) Patents Act of 2015. The sponsors argue in the proposed legislation’s proposed findings that the AIA has caused “unintended consequences[,] including the strategic filing of post-grant review proceedings to depress stock prices and extort settlements.” In addition, the sponsors suggest that “efforts by Congress to reform the patent system without careful scrutiny create a serious risk of making it more costly and difficult for legitimate innovators to protect their patents from infringement, thereby weakening United States companies and the United States economy.” The bill’s findings also note that recent Supreme Court decisions in “Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S.Ct. 1749 (2014) and Highmark Inc. v. Allcare Health Management System, Inc., 134 S.Ct. 1744 (2014) [have] significantly reduced the burden on an alleged infringer to recover attorney fees from the patent owner, and increased the incidence of fees shifted to the losing party[.]”

As a result of these concerns, the STRONG Patents Act takes a different tack in approaching patent system reform. Rather than making patent infringement actions more difficult maintain, the bill seeks to strengthen patents rights, including by reforming the still-evolving procedures in AIA post-grant proceedings, which it targets as being too favorable to petitioning parties challenging patents. Major provisions of the STRONG Patents Act include:

AIA Post-Grant Proceedings Reforms. The bill proposes changes to AIA post-grant proceedings to “ensure balance.” Changes include requiring PTAB panels to construe claims using the district court standard, rather than construing claims to have their broadest reasonable meaning; more liberal availability of claim amendments; and restoring an issued patent’s presumption of validity by requiring challengers to prove invalidity by clear and convincing evidence. The bill also would require one PTAB panel to decide whether to institute proceedings and a different PTAB panel to decide the merits of a challenge.

Pleading Standard. The bill would increase the patent infringement pleading requirement to match the standard for other civil cases under Iqbal and Twombly, including by deleting Form 18 from the Federal Rules of Civil Procedure. Under the so-called “Twiqbal” standard, a pleading must contain enough factual allegations to state a plausible claim for relief, but not the detailed contentions that would be required under the Innovation Act.

Willfulness Infringement. The bill would change the standard for willful patent infringement from the Seagate standard to that applied by the Supreme Court in Octane Fitness. Under the new standard, the court could award multiple damages if the patentee proves by a preponderance of the evidence that the infringement was willful or in bad faith.

Divided Infringement. The bill responds to the Supreme Court’s Akamai v. Limelight case relating to divided infringement by clarifying that in cases of indirect infringement, it is not necessary for all steps of a patented process be performed by a single entity.

Other Provisions. In addition, the STRONG Patents Act includes several other provisions, including: eliminating USPTO fee diversions, clarifying the status of universities under the AIA’s “micro-entity” fee schedule, and empowering the Federal Trade Commission to regulate abusive patent demand letters.

The STRONG Patents Act was introduced by Senators Chris Coons (D-Del), Richard Durbin (D-Il), and Mazie Hirono (D-HI). The full text of the bill is available HERE.

Lyrica or generic pregabalin? An innovative court order

Warner-Lambert Company, LLC v Actavis Group PTC EHF and others [2015] EWHC 485 (Pat) is a Patents Court, England and Wales ruling of Mr Justice Arnold on 2 March which has already received substantial attention on the IPKat blog, thanks to Darren Smyth, here. 02 March 2015

In short, in January 2015, in an action for patent infringement the Patents Court dismissed Warner-Lambert's application for an interim injunction. The problem before the court was that doctors, when prescribing pregabalin as a painkiller for neuropathic pain (the sole use that remained within the scope of patent protection), weren't prescribing it by reference to its brand name LYRICA but rather by reference to its generic name, i.e. pregabalin. Said Arnold J, it did not lie within the power of Warner-Lambert, or indeed of Actavis (which was poised to launch its own generic version of pregabalin) to ensure that doctors prescribed the drug only as LYRICA when treating neuropathic pain, since this was an outcome that depended entirely on the behaviour of the doctors as prescribers.

Subsequently both Warner-Lambert and Actavis sought orders that prescribers be given clear guidance by the National Health Service (NHS England), to the effect that the brand name should be used for the patented indication while the generic name should be used for non-patented indications. The parties also wanted prescription software suppliers to alter their software in order to make it easier for doctors to prescribe pregabalin by brand name. Meanwhile. the parties agreed that Warner-Lambert should give a cross-undertaking in damages, but they could not agree as to its ambit: should it only be given to Actavis or should it also cover other generic manufacturers, in this case Teva and Dr Reddy.

Arnold J's conclusions, in brief, were as follows:

On the evidence, the issuing of guidance by NHS England was the most efficacious, dissuasive and cheapest solution to the problem, especially since the alternative from Warner-Lambert's point of view would be to pursue its applications for interim relief against all the generic suppliers.

The benefit of the cross-undertaking should be extended to the other generic companies for two reasons: (i) if Warner-Lambert's patent later turned out to be invalid, the companies ought not to be prevented from making sales of generic pregabalin, and (ii) even if the patent was valid, the effect of LYRICA being prescribed and dispensed at the expense of generic pregabalin in circumstances that did not amount to an infringement of the patent could not be discounted.

EPLIT meets in Paris: will you be there?

PatLit has just been contacted by the working group within the European Patent Litigators Association (EPLIT) which is responsible for organizing the association's annual meetings.  Says the working group:

"As you may know, EPLIT is focusing on patent litigation in Europe, in particular litigation before the future Unified Patent Court.  

We now have the pleasure to announce our second annual meeting which will take place on 29 May 2015 in Paris. The speakers at the meeting are deeply involved in setting up the Unified Patent Court, so we are confident that they will share some hot off the press news regarding the ongoing preparatory work for this Court with us".

The programme for this event can be accessed here or downloaded here.

Portuguese court strikes down 30-day mandatory arbitration deadline in patent infringement trial

... can be unconstitutional

PatLit has learned of an important Constitutional Court ruling from Portugal, where in recent years there have been substantial steps to improve the speed and efficiency of the resolution of intellectual property disputes. The ruling in question is Decision No. 123/2015, of 12 February 2015, which establishes that the 30-day deadline imposed for the initiation of mandatory arbitration of patent disputes is unconstitutional. This deadline was introduced by Law No. 62/2011, which created a system for settling disputes arising from industrial property rights regarding reference medicines and generic medicines, which was published on 12 December 2011.

The challenge to the law's constitutionality was brought after the country's Intellectual Property Court refused to grand interim injunctive relief in a patent infringement action, saying that the parties had first to go for mandatory arbitration.

Source: email circular from Baptista, Monteverde & Associados, Lisbon, Portugal.  Further details of this decision can be found here.  For more background, see guest post on PatLit by Pedro Malaquias here.

EPO Proceedings: a practical guide to success?

Proceedings Before the European Patent Office: a Practical Guide to Success in Opposition and Appeal, by Marcus O. Müller and Cees A.M. Mulder, is a neat little book and quite a departure from the usual Edward Elgar Publishing fare. While that publisher's list of IP titles has blossomed in recent years, it has been firmly and unashamedly directed towards the academic market. But here's something for the practitioner.

This blogger does not believe for a minute that there is any guarantee of success in EPO proceedings, given -- if nothing else -- the procedural inconsistencies that may be encountered. However, he does believe that, with common sense and good preparation. the chances of succeeding will be greatly enhanced. This little guide seems to him to do much to offer the intelligent reader a reasonable prospect of coming away from it with a far better understanding of how to tackle EPO proceedings, with neatly flagged pellets of practical advice and examples sprinkled throughout the text and with plenty of citations and even some statistics.

As the publisher says:

Experienced practitioners will find that the detailed case law citation adds depth to their knowledge. The practical advice and the illustrations from case law provide patent lawyers and patent attorneys with invaluable guidance on specific procedural and substantive questions, as well as on how to act properly in opposition and appeal proceedings. Proceedings Before the European Patent Office: A Practical Guide to Success in Opposition and Appeal is an indispensable tool in the armoury of all patent practitioners.

The first-named author is a member of the EPO Boards of Appeal, while the second is a practitioner. Between them they seem to have come up with an accessible and user-friendly package, a good deal more readable than much of the inevitably more formal material that can be found in Board of Appeal decisions and on the EPO website itself.  This blogger hopes that when, as will certainly happen, it is revised for future editions, it will be allowed to remain fresh and slender and will not suffer from the middle-age spread that comes from absorbing too many details.

Bibliographic data: paperback and online. xxii + 174 pages. ISBN:9781784710095, eISBN:9781784710101. Book's web page here.

MIP International Patent Forum: something for patent litigators too

This blogger thinks it might be a good idea to draw the attention of readers of this blog to the fact that Managing Intellectual Property magazine's International Patent Forum 2015 will take place less than a month away, on 10 and 11 March, in the elegant yet functional surroundings of London's Waldorf Hilton Hotel. In keeping with the traditions of this event, which was first held five years ago, admission is free for in-house corporate and patent counsel, academics and R & D professionals.  If you don't fall within any of these categories but are a reader of the IPKat weblog, you are entitled to the benefit of a £300 discount against the cost of registration.

From the point of view of anyone litigating patents, there are sessions on post-grant and inter partes procedures in the United States and on the new IPR courts in China and Russia, not to mention some cerebral stuff on advanced strategies for litigating patents in the new Europe.

You can see what the IPKat weblog has had to say about this event here, and about some of its speakers here.  The Forum's website, with programme, speaker and registration details, can be accessed here.  Some 200+ folk are expected to attend. This blogger suspects that many will be there because, by pure coincidence no doubt, the Managing IP Global Awards 2015 dinner takes place on the evening of 11 March in the InterContinental Hotel Park Lane.

Disclosure: this blogger is the founding editor of Managing Intellectual Property and is already looking forward to his dinner ...

US To Take Another Crack At Patent Litigation Reform?

In January, the 114^th Congress arrived in Washington, D.C., with Republicans controlling both the Senate and the House of Representatives for the first time since 2006. One of the first orders of business was to restarted the patent litigation reform efforts that stalled in the last Congress.

On February 5, 2015, a group of legislators introduced a new bill, HR 9, entitled the “Innovation Act.” A copy of the bill as introduced is available HERE.

HR 9 continues recent attempts to address issues left unresolved by the Leahy-Smith America Invents Act of 2012. Very similar legislation passed the House in the last Congress, but did not advance in the Senate, apparently due to opposition from then-Senate Majority Leader Harry Reid. With Republicans now controlling the apparatus of the Senate, it appears that some form of reform legislation has a good chance of passing. HR 9 was introduced by a bipartisan group of lawmakers. In addition, the White House repeatedly has endorsed some steps to curb abusive patent litigation.

The following are some key features of HR 9:

1. Detailed Pleadings. HR 9 proposes to add a new provision to the Patent Act, 35 U.S.C. § 281A, requiring claims for patent infringement raised in a complaint, cross-claim, or counterclaim to be pleaded with significant detail, including identifying the patents and claims asserted, the specific accused products or processes, and a statement of how the product or process infringes the claim, including “with detailed specificity, how each limitation of each claim identified . . .  is met by the accused instrumentality.” The pleading also would need to include information concerning the claimant’s standing, prior litigation involving the patent, and whether the patented invention is “essential” for purposes of implementing any industry standards. If the required information is “not reasonably accessible,” the claimant would be allowed to substitute an explanation, identifying the steps taken to ascertain the information. The bill would direct the Supreme Court to eliminate Form 18 of the Federal Rules of Civil Procedure. The Federal Circuit has relied on that form in refusing to require additional factual allegations in infringement pleadings. See R+L Carriers v. Driver Tech LLC, 681 F.3d 1323 (Fed. Cir. 2012).

2. Loser Pays. HR 9 would amend 35 U.S.C. § 285 to create a loser pays system for fees and expenses incurred in any action “arising under” the Patent Act. A “prevailing party” would be entitled to an award of reasonable fees and expenses unless the court concluded that the losing party’s “position and conduct . . .  were reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.” A party could move for an order requiring an opposing party to state whether it is able to pay such an award, and if it could not pay the court would be authorized to join an “interested party” and hold that entity liable for any fees and expenses awarded.

3. Discovery Stays. If the district court determines that claim construction is required, the bill would automatically stay discovery on any subject other than the meaning of the patent claims, subject to exceptions at the court’s discretion.

4. Customer Stays. HR 9 would automatically stay infringement actions brought against customers when the manufacturer of an accused product is named in the action and the customer and manufacturer agree to the stay. Although the customer would be bound by issues decided in litigation against the manufacturer in most cases, it could seek relief from an adverse result if the manufacturer did not defend the action through appeal or entered into a consent judgment, where the result would unreasonably prejudice the customer or be manifestly unjust.

5. Trademarks in Bankruptcy. HR 9 would amend the Bankruptcy Code, 11 U.S.C. § 101, to include trademarks, service marks and the like to the definition of “intellectual property” in the Code. This change would give some additional protection to trademark licensees when a licensor files for bankruptcy protection. 11 U.S.C. § 365(n).

6. Demand letters. The bill seeks to address, at least in part, criticisms that non-practicing entities (NPE’s) and patent assertion entities (PAE’s) engage in deceptive licensing efforts by sending generic demand letters to hundreds of potential infringers, seeking to leverage the threat of expensive litigation to extract settlement agreements. A number of states recently have enacted laws to prohibit abusive patent assertion practices. HR 9 would provide that a demand letter cannot be used to establish willful infringement unless it “identifies with particularity the asserted patent, identifies the product or process accused, identifies the ultimate parent entity of the claimant, and explains with particularity, to the extent possible following a reasonable investigation or inquiry, how the product or process infringes one or more claims of the patent.”

7. Disclosure of real party in interest. The bill would require a plaintiff to notify the USPTO, the court, and all parties of the real parties in interest in any patent infringement suit (and their ultimate parent entities), including any assignee, licensee with the right to grant sublicenses, and any other entity with a financial interest in the patent. If a party in interest is a partnership, the bill would require disclosure of all partnership interests in excess a five percent share of the partnership.

8. Discovery reforms. The bill would direct the Judicial Conference of the United States to investigate and propose procedural reforms to remedy the “asymmetries in discovery burdens and costs” in patent litigation, including the cost and burdens of document and ediscovery, sequencing and bifurcation of discovery, and case scheduling and management in patent actions.

Although HR 9 continues the momentum towards patent litigation reform that started in the last Congress, some commentators have noted that recent changes in the law, including provisions of the America Invents Act and court decisions, may be reducing the incidence of litigation by NPEs and PAEs. As a result, some groups representing patent owners may oppose the bill due to concern that the additional restrictions are unnecessary and would needlessly impair the ability of patentees to enforce their rights against infringers.

Clash of Bread Cultures

Bread and beer are reported to have been the main foodstuff in medieval France and Germany but the crafts have developed in completely different directions.

German beer is governed by the German purity law of 1516 and German brewers would never ever add anything other than water, malt and hops to their beer. German beer consumers appreciate the subtly different nuances of the taste of their Pilsner or Helles. On the other hand, French brasseries offer all kinds of beer with all sorts of natural and artificial flavours and brewed using strange ingredients.

In what concerns bakery, German shops are known to offer a large variety of bread with all sorts of cereals and other stuff in it. French bakery is governed by a sort of purity law for baguette foreclosing using ingredients other than baking flour, water and salt in their bread and yeast or leaven/sourdough for the fermentation (at least when it comes to ""pain de tradition française", "pain traditionnel français", "pain traditionnel de France" or the like to be precise). French people love to discuss the subtle differences in the crispiness and fluffiness of the baguettes of the different boulangers in their hometown.

It would therefore be just as non-obvious for the traditional French Boulanger to put stuff like bran or oatflakes into his dough as it would be non-obvious to put bananas, whiskey or other flavours into his beer.

How does this notion of obviousness, which is based on national traditions, translate into patent law?

The patent underlying the the decision T 1303/10  of the EPO's technical board of appeal relates to a recipe and to a baking mix for "pains de type français à goût levain" (Frech bread with a taste of leaven) held by a French company, which was opposed by the German bakery association "Verband der Backmittel- und Backgrundstoffhersteller e.V.  Geschäftsbereich Deutschland. The patent as granted differed from the prior art that a narrow range of dry leaven was selected from a broader range known in the prior art. The board held that this range could have been found by trial without inventive skill.

Auxiliary request III was more interesting by far because it proposed to add some bran to the dough (to thereby deviate from the French purity law) in order to improve the preservability and the organoleptic properties of the bread. Of course, the German bakery association submitted that adding bran to the bread is obvious for the skilled person.

A document D30 disclosed information the effects of larger amounts of bran onto the properties of bread but the amounts were such that be skilled person would have feared that the characteristic organoleptic properties of French bread would have been impaired (in other words: he would have ended up with  German bread).

The board finally found that, starting from a very specific recipe for French bread, adding 0,4 to 1 weight parts of bran was non-obvious for the person skilled in the art.

To conclude, using Bran and Sourdough in bread is obvious, but not when it comes to Baguette.

Beware of Digital Signature Folders

In the good old times, patent attorneys used to work by messing up the file, scribbling amendments into documents, dictate submissions to the offices and then letting their secretaries do the clean up and prepare the documents and present them neatly in a leather-would signature folder. The attorney would then put his glasses on, leaf through everything put his signature on the documents if everything was to his satisfaction and proceed to the tea break.

While the work distribution of messing up and cleaning up the file is basically unchanged, this blogger sometimes misses the leather-wound signature folder. The electronic equivalent is a PDF-viewer software included in the EPOline client and today's assistants have to prepare neat PDF documents for online-filing rather than writs on handmade paper. The PDF-viewer opens automatically when clicking on the "sign" button in the software and the electronic signature can be applied only after closing the viewer again and confirming that the signature shall be applied indeed. As compared with the leather-wound signature folder, the PDF-viewer is much less classy. Besides of the PDF-documents, it shows a lot of unreadable XML code and leafing through a submission with multiple attachments may be fairly bothersome.

It is therefore tempting to circumvent the clumsy PDF-viewer, have the documents presented on paper (in a leather-wound signature folder if you like) and to trust that your secretary makes sure that what is electronically signed is identical to what you have checked on paper.

This is what the attorney did in the case underlying the decision T 1101/14 available here. In this case, the secretary had been instructed to upload the document with the grounds of appeal but failed to do so. The attorney had applied the electronic signature without remarking that the grounds of appeal were missing. In the request for re-establishment of rights, it was argued that these were two isolated mistakes in an otherwise secure system.

The Technical Board of Appeal did not find the attorney's error excusable. The catchword reads:

A representative who mistakenly signs a statement of grounds of appeal having most of its pages missing must, in the absence of special circumstances which could justify the representative's mistake, be considered not to have taken all due care required by the circumstances.

What can the attorneys learn? We have to leaf through the electronic documents in the PDF-viewer before applying the electronic signature and are not entitled to blame the secretary if something is missing.
 

ZTE fails in bid to reopen patent trial post-judgment but before judge seals order

Vringo Infrastructure Inc v ZTE (UK) Ltd [2015] EWHC 214 (Pat) is a 30 January decision of Mr Justice Birss, sitting in the Patents Court, England and Wales.  It's far from being the first time that these two adversaries have clashed in the courts of England and Wales [see eg earlier PatLit post here with links to earlier litigation].

This time round, ZE applied to re-open a trial at which Birss J concluded that Vringo's patent was valid, having found that the relevant prior art documents did not disclose protocol transparency. ZTE then looked for other examples of protocol transparency, finding prior art documents on which it sought to rely. Having done so, it obtained an order suspending the court's sealing of the order arising from the trial pending this application to reopen the trial.

In short, Birss J refused the application to reopen the trial. In his view

* The power to reverse a decision before the order had been drawn up existed, and was not limited to exceptional circumstances: every case depended on its circumstances and the overriding objective was the starting point [ie the court should deal with cases justly and at a proportionate cost].

* Allowing an amendment before a trial began was different from allowing it at the end of the trial to give an apparently unsuccessful defendant a chance to run a new argument, particularly where the amendment was sought after judgment,

* A party could not just wait for a judge's findings and say that he could have called more evidence on that point. If an amendment to the statements of case would not have been permitted before trial, it was unlikely to be permitted afterwards -- and, even if it were permitted, that did not mean that it should be permitted after judgment,

* In the context of patent litigation, the selection of prior art by a party challenging a patent was a matter of his own free choice and it was not open to a challenger simply to re-open the matter on the basis that a judge had not dealt with it.

* The prior art relating to protocol transparency was plainly potentially relevant earlier and could have been found with reasonable diligence. It was a toss-up as to whether that prior art would have had an important influence on the trial's result, and this new evidence was entirely credible.

* Points in favour of granting ZTE's application were that neither party had acted to its detriment in reliance upon the judgment; the patent was to be effective; the case was really only about money rather than injunctive relief; and costs incurred in a retrial would be compensatable

* Points against granting the application included the facts that there was no excuse for ZTE not having used the documents before; it would lead to a trial of at least two days; and the legitimate expectation of finality following the original trial would be thwarted. The strength of ZTE's case was not so clear as to show that the patent was probably invalid, since it would merely involve an arguable piece of prior art. A party had to make careful selections of prior arts and it was incomprehensible that ZTE had overlooked this prior art earlier.

Come to Bournemouth! Free public lecture on the unitary patent and the UPC

Next week, on Thursday, 19 February, there's a public lecture that should appeal to anyone who is interested in patent litigation and is not too far from England's south coast. The title is "The Unitary Patent and the Unified Patent Court: a private international law perspective" and the speaker is the excellent Professor Paul Torremans (University of Nottingham, which is a long, long way from the seaside).

The lecture takes place in Bournemouth University; it's free -- but space is limited. Details and registration can be accessed here.

From hepatitis B virus antigens to wine and canapés: Biogen v Medeva revisited

The "Biogen v Medeva 20 Years On" event, organised by London-based law firm Rouse last year and cruelly postponed on account of a strike call by one of the London Underground unions, was finally held last week.  Rouseniks Mary Smillie and Catriona Smith bring us this report on one of the most influential pieces of British patent litigation to have emerged in recent decades:

Rouse invited the main protagonists in the landmark House of Lords case of Biogen v Medeva for a reunion at the Crisis London Skylight Café near Spitalfields, before an invited audience. This now famous case on a patent for hepatitis B virus antigens led to the well-known speech of Lord Hoffmann in the House of Lords and the concept of 'Biogen Insufficiency'. The event was chaired by Rouse's Diana Sternfeld who acted for Medeva. The panel was made up of those involved on the commercial side from Biogen's licensee SmithKline Beecham Biologicals (Bill Tyrrell) and Medeva (Peter Cozens) and those who ran the case for Biogen (Jim Haley, Leslie McDonell, Simon Thorley QC and Andrew Waugh QC) and for Medeva (Peter Prescott QC, Adrian Speck QC and John Ilett). We also had the experience of Medeva's expert witness, Jeff Almond and comments from The Rt Hon Professor Sir Robin Jacob and Martin Howe QC.

It was an evening of nostalgia, shared wisdom, anecdotes and fun. We remembered those who are no longer with us, notably Sir Hugh Laddie, who acted for Biogen, and the inventor, Sir Ken Murray.

The story started with the founding of Biogen in 1978 by scientists around the globe working in their home labs. Ken Murray took the lead working on the production of antigens to the hepatitis B virus, using DNA technology, at the University of Edinburgh. The patent claimed priority from 1978 and was granted in 1990. It was licensed to SmithKline Beecham Biologicals, who had developed a recombinant hepatitis B vaccine called Engerix-B which came onto the market in the late 1980s. Although SmithKline Beecham Biologicals thought Biogen's patents were initially dubious, and had (unsuccessfully) opposed the narrower patent (EP0013828 'Recombinant DNA, hosts transformed with it and polypeptides produced by the hosts') at the European Patent Office, they changed track when Medeva came along with results to indicate they had a vaccine which worked in patients who did not respond to Engerix-B. SmithKline Biologicals then lined up with Biogen to fight Medeva in the Patents Court and beyond.

The leading counsel, Hugh Laddie and Peter Prescott, were described as being at the 'height of their game'. Andrew Waugh, then a junior, recalled his anxiety at having to prepare to explain the 'smudgeograms' (the name given by Peter Prescott to auto radiographs showing experimental results) to the House of Lords without the benefit of overhead projectors or a whiteboard. Adrian Speck reflected that it was his first case and that it was a high point of his career.

The case was difficult, as witnessed by the time it took in the Court of Appeal (18 days) and the Lords (14 days) partly because of the nature of the science. While genetic engineering was a fast developing field, there had been a voluntary moratorium on further work by scientists because of concern about the safety of genetically modified bacteria in use. This meant that, while ideas were there and developing at speed, research had halted, leaving the theoretical methods available to reach desired end-points undeveloped. The skills of the expert witnesses in the case were praised and some details of the difficulties of undertaking the research were shared by Jim Haley, who still has the original court transcripts. Examples included the difficulties of working on microscopic cells through clumsy glove boxes.

Jim Haley pointed to an analogy given by Lord Hoffman to the invention by the Wright brothers: 'The idea of making HBV antigens by recombinant DNA technology was shared by everyone at the Geneva meeting of Biogen in February 1978 and no doubt by others working in the field, just as the idea of flying in an heavier-than-air machine had existed for centuries before the Wright brothers. The problem which required invention was to find a way of doing it.'

The analogy had resonated with Mr Haley, as his firm at the time (Fish & Neave of New York) had successfully defended a patent for the Wright brothers at an early point in their history.

This was the first time the House of Lords had considered the validity of a product made by genetic engineering, yet the issue decided in Biogen v Medeva is still a live issue today. As Robin Jacob commented, the width of a claim, and what is meant by enabling an invention across the width of that claim, is still a challenge. The Biogen insufficiency test works for a patent claiming a chemical class; you have to be able to make all the chemicals in that class. In other cases the test will not work, and in yet others, Biogen Insufficiency will ride again. Robin Jacob concluded that Sir Hugh put up a great fight, and duly lost. The panel concurred that Biogen had won at first instance because of Sir Hugh's closing speech.

The case was heard before judgment transcripts were made available in advance. When Diana Sternfeld heard the opening words of Aldous J's judgment, that 'The patent is valid and infringed' she needed 30 seconds to compose herself before speaking to the clients sitting in the public gallery. She left the courtroom and bumped into Hugh Laddie, also on the other side of the double doors, who said to her 'now, that is a turn up for the books'.

The idea of sides getting together after the end of such litigation to debate the issues was much praised, preferably before 20 years have elapsed. The two sides commented repeatedly that meeting each other face to face in a friendly environment was an occasion to be celebrated after such a hard fought case.

The evening was rounded off by wine and canapés and lively conversation.

Getting the balance right: when not to transfer a patent suit to a cost-capped forum

In Canon Kabushiki Kaisha v Badger Office Supplies Ltd and others, a Patents Court, England and Wales, ruling of Mr Justice Arnold last Friday, the court had to consider an application by the three defendants to transfer
a patent infringement claim from the Patents Court to the Intellectual Property Enterprise Court (the IPEC -- technically, like the Patents Court, part of the High Court but which, for all functional purposes, is a lower court and the successor to the Patents County Court). This application failed since the infringement claim was of some complexity and would be difficult to try within the two-day framework allowed for the IPEC. To address the defendants' concerns as to costs if the costs regime of the High Court were to apply instead of the cost-capping regime of the IPEC, the Patents Court would however exercise firm costs management. On that basis, Arnold J directed that a hearing take place so as to enable the parties could prepare for trial in a proportionate manner, adding that to try an infringement claim of some complexity, and an attack on validity on the basis of three items of prior art, in a two-day trial would be difficult.

This decision, which was delivered extempore, was picked up by the Lawtel subscription-only service, which also gave a brief summary of the salient facts.  In financial terms the defendants argued that the cost of a High Court patent action, estimated at £500,000, was disproportionate to the claim's value, while Canon -- the patentee  -- argued that the patent protected sales of products worth approximately €70 million per annum, and had 12 years to run, so that the claim's value greatly exceeded the £1 million identified as a guideline threshold in the IPEC guide. Canon also objected that it was unfair to subject it to the cost-capping regime in the IPEC where the defendants had not asserted that they could not afford to litigate in the High Court.

Patent Infringement on Trade Fairs

Anything for sale here?

PatLit has recently reported a decision of the German Supreme Court (BGH) in relation to a risk of first offence by exhibiting products on a trade fair in an unfair competition case here.

The court found that the mere exhibition of products does not necessarily mean that the products are offered for sale. Further evidence is needed to support this finding.

The question if and how this can be transferred to patent infringement remained open.

The OLG Düsseldorf has now decided that exhibiting infringing products on a specialist trade fair is "offering for sale" in the sense of § 9 S. 2 Nr. 1, 2. Alt. of the German Patent Act (PatG) unless the fair qualifies exceptionally as a pure "performance show" (Leistungsschau).

This ruling is contrary to an earlier ruling by the  Mannheim District Court (29.10.2010, 7 O 214/10, see here) which judged that the mere fact of exhibiting a product infringing a patent was not sufficient to prove the alleged infringer's intention to sell the product in Germany with a degree of certainty sufficient to grant a preliminary injunction.

The question had been answered for trademark infringements by exhibiting on trade fairs in the decision Pralinenform II and in relation to a risk of first offence in an unfair competition case here.

For more background information see here.

They think it's all over -- but the Comptroller can intervene

Kennametal Inc v Pramet Tools SRO, Associated Production Tools Ltd and Comptroller-General of Patents, Designs and Trade Marks, a Court of Appeal, England and Wales, ruling last Wednesday, is noted on subscription service Lawtel. It's a short case.

After Kennametal's UK patent was held invalid in earlier proceedings ([2014] EWHC 565 (Pat)), Kennametal did not seek permission to appeal against the revocation decision. Instead ,it applied -- and failed -- to get a stay of an order revoking the patent, pending the outcome of an application to amend which it had brought before the European Patent Office. Kennametal subsequently did appeal against the refusal to stay the revocation. Shortly before the date fixed for hearing this appeal, Kennametal and Pramet reached a settlement. The day before the hearing, the Comptroller received notice from Pramet that it intended neither to oppose the appeal nor to attend the hearing. At this point the Comptroller immediately served notice, stating its intention to intervene and to attend the hearing in order to oppose the appeal. The Court of Appeal ((the Chancellor, Sir Terence Etherton, together with Lords Justices Christopher Clarke and Vos) had to decide whether it was appropriate to adjourn in light of the recent developments.


Granting the Comptroller's application, the Court of Appeal held that the points raised in the appeal were important and of general application in relation to the revocation of patents. It was accordingly important that the appeal be argued properly and fairly. If that were to be done, it was perfectly clear that there was no alternative to adjourning the appeal in order to allow the important points of principle to be argued properly by the Comptroller.

This ruling serves as a warning that, while settlement of a dispute by mutual agreement between the parties is a desirable aim, it is not an end in itself and, in this case, it is not an end to the litigation either.

Pharma and biotech patents: time for a rethink?

"Pharma & Biotech Patent Litigation" is the title of C5's 7th annual Forum on that topic, taking place on 19 and 20 March 2015 in Amsterdam's Hotel Okura.  A blogpost on pharma and biotech patents on the IPKat last week raised the question whether, given the fact that the pharma and biotech sector has so many legal issues that are largely unique to it, thought should be given to starting afresh with a sui generis for protecting innovation in the sector. This would obviously have major consequences not just for protection but also for litigation. A number of readers have already posted their comments on that blog, and readers of PatLit are invited to do so too.

Incidentally, the Forum's organisers are offering a 10% reduction on the registration fee for IPKat readers who quote the VIP Katcode 630IPKAT10. Further particulars and registration details are available here. There's also a pre-conference workshop here.

Supreme Court Limits Federal Circuit’s Ability To Revise Claim Construction On Appeal

On January 20, 2015, the U.S. Supreme Court handed down its first patent decision of the current term, rejecting the U.S. Court of Appeals for the Federal Circuit’s long-standing practice of reviewing district court patent claim construction rulings, including subsidiary factual findings, without deference. The Supreme Court ruled that the Federal Circuit review all district court factual findings for “clear error,” even if the fact is nearly dispositive of the claim construction issue. The ultimate interpretation of the claim remains a legal conclusion, however, that the Federal Circuit will review de novo. Teva Pharmaceticals USA, Inc. v. Sandoz, Inc., Case No. 13-854 (Jan. 20, 2015). The slip opinion is available HERE. 

Background:

The interpretation of the asserted claims frequently is critical to the outcome of a patent dispute. The construction of disputed claim terms determines whether an accused product infringes the patent and is pivotal to most invalidity defenses. In Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), the Supreme Court ruled that claim construction is an issue delegated to the trial judge, even when it involves fact issues, such as the meanings of terms of art recited in a claim. Markman did not expressly state whether those factual findings subsumed in a claim construction ruling are subject to de novo review (as normally would be the case for legal rulings) or to review for “clear error” (as normally would apply to judicial fact findings).  In Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), the Federal Circuit held that it would review district court claim construction rulings to de novo, reviewing the record without deference. Critics of the Cybor policy, including several Federal Circuit judges, have pointed out that the approach is inconsistent with the prevailing claim construction analysis, which requires district courts to consider a factual record consisting of both “intrinsic” evidence (the patent claims, specification, and prosecution history) and “extrinsic” evidence (such as expert testimony, treatises, art references, and other facts outside the patent and prosecution).

Teva Pharmaceuticals v. Sandoz Dispute

The Supreme Court ruling comes in a case involving drug patents under the Hatch Waxman Act. Teva Pharmaceuticals owns several patents covering its Copaxone® multiple sclerosis drug. Sandoz and other generic drug companies filed Abbreviated New Drug Applications seeking approval to market a generic form of the drug. In response, Teva filed an infringement action under the Hatch Waxman Act. 35 U.S.C. § 271(e)(2).

Sandoz argued that a group of claims in the Teva patents were invalid as indefinite, because the term “molecular weight” appearing in the claims was subject to multiple incompatible meanings, and the patents themselves and the relevant prosecution histories did not resolve the ambiguity. The United States District Court for the Southern District of New York ruled that the claims were not indefinite. Among other things, the district court based its determination on its construction of the disputed term, relying on expert testimony presented by Teva that the term "molecular weight" was not ambiguous.

On appeal, the Federal Circuit, reversed, ruling that the claims were indefinite. The Federal Circuit reviewed the conflicting expert testimony Teva and Sandoz presented to the trial court on the question whether the term “molecular weight” was ambiguous. The Federal Circuit concluded that “on de novo review of the district court's indefiniteness holding, we conclude that Dr. Grant's testimony [introduced by Teva] does not save Group 1 claims from indefiniteness." Teva appealed to the Supreme Court.

Supreme Court Decision

In a 7-2 decision, the Supreme Court reversed the Federal Circuit, holding that it should have accepted the district court’s determination that “molecular weight” was not ambiguous unless the finding was clearly erroneous. Justice Breyer, writing for the majority, reasoned that Fed. R. Civ. P. 52(a)(6) mandates this more deferential standard of review and nothing in the Court’s jurisprudence or the rationales adopted by the Federal Circuit in Cybor permitted a different standard.

Breyer noted that although Markman gives the district judge sole responsibility to construe a patent claim, it recognizes that claim construction will require subsidiary factual findings. Analogizing a judge’s role in claim construction with a similar role in interpreting contracts or deeds, the Court observed that these subsidiary findings are subject to review for clear error, even when the ultimate interpretation of the documents receives de novo review. During the claim construction process, “courts may have to resolve subsidiary factual disputes. And . . . [Rule 52(a)(6)] requires appellate courts to review all such subsidiary factual findings under the ‘clearly erroneous’ standard.” Slip op. at 7.

The majority was not impressed with Teva’s policy argument that de novo review was important to ensure uniform interpretation of patents nationwide, preventing a “zone of uncertainty” that would discourage innovation. Instead, the Court stated that district court judges were reliable factfinders for scientific or technical disputes, noting that, “A district court judge who has presided over, and listened to, the entirety of a proceeding has a comparatively greater opportunity to gain that familiarity than an appeals court judge who must read a written transcript or perhaps just those portions to which the parties have referred.” Slip op. at 7-8. Moreover, it stated that inconsistent claim construction rulings by different trial courts would be infrequent and unlikely to cause uncertainty:

Neither the [Federal] Circuit nor Sandoz, however, has shown that (or explained why) divergent claim construction stemming from divergent findings of fact (on subsidiary matters) should occur more than occasionally. After all, the Federal Circuit will continue to review de novo the district court’s ultimate interpretation of the patent claims. And the attorneys will no doubt bring cases construing the same claim to the attention of the trial judge; those prior cases will sometimes be binding because of issue preclusion, see Markman, 517 U. S., at 391, and sometimes will serve as persuasive authority. Moreover, it is always possible to consolidate for discovery different cases that involve construction of the same claims. And, as we said in Markman, subsidiary fact-finding is unlikely to loom large in the universe of litigated claim construction.

Slip op. at 9.

Finally, the Court provided specific guidance on how to apply both review standards in claim construction appeals. First, in situations where the district court relies only on the intrinsic evidence (claim language, specification and prosecution history), its ruling is subject to de novo review. If the district court decision relies on factual underpinnings, however, such as evidence concerning the “background science or the meaning of a term in the relevant art during the relevant time period[,]” it should make specific factual findings and those findings are subject to review for clear error:

The district judge, after deciding the factual dispute, will then interpret the patent claim in light of the facts as he has found them. This ultimate interpretation is a legal conclusion. The appellate court can still review the district court’s ultimate construction of the claim de novo. But, to overturn the judge’s resolution of an underlying factual dispute, the Court of Appeals must find that the judge, in respect to those factual findings, has made a clear error. Fed. Rule Civ. Proc. 52(a)(6).

Slip op. at 13. The clear error standard applies even when the factual finding “is close to dispositive of the ultimate legal question of the proper meaning of the term in the context of the patent.” Id.

Applying this framework to the case on appeal, the Court held that the district court’s fact finding that a person skilled in the art would not have consider the “molecular weight” ambiguous was entitled to deference. “The Federal Circuit should have accepted the District Court’s finding unless it was “clearly erroneous.” Our holding today makes clear that, in failing to do so, the Federal Circuit was wrong.” Id. at 16.

Justice Thomas dissented, arguing that the entire claim construction issue was legal, notwithstanding any subsidiary facts, and should be subject to de novo review, just as a trial court’s interpretation of a statute is reviewed without deference. He added that he feared the ruling would lead to divergent decisions in patent cases, leading to uncertainty and, ultimately, suppression of innovation.

Although the Teva decision does not expressly alter the analytic framework used in claim construction proceedings since Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), it is likely to introduce important strategic issues in patent cases, especially relating to conduct of claim construction proceedings. The extent of those changes will depend on how the Federal Circuit applies the decision in subsequent cases.

Spanish challenge to new European regime: is the Court of Justice failing to engage with the issues?

German attorney and Certified Specialist for IP Law Ingve Stjerna has written a further analysis of the current judicial scrutiny of the European Union's proposed (but not yet operative) new regime for patents.  It's "Unitary patent“ and court system – Advocate General’s Statements of Position: Superseded by reality" and you can access it via Ingve's website here.  Focusing on the Advocate General's Opinion in Case C-146/13 Spain v Parliament and Council [which, astonishingly, is still not available in English] and the implications of the most recent events at the EPO, Ingve sets the scene as follows:

On 18 November 2014, Advocate General Yves Bot‘s Statements of Position in the Spanish nullity proceedings against the two Regulations on the “unitary patent” were published, his recommendations to the Court being a rejection of the actions. Once again, the legal issues are subordinated to the political interest in the implementation of the “patent package”, however, based on a widely not very convincing argumentation. Especially the Statement in case C-146/13 largely tries to avoid any contextual debate of the critical aspects raised, e. g. in relation to the adequacy of legal protection at the European Patent Office, while contradictions and misunderstandings occur repeatedly. Not least in view of the recent events at the European Patent Office, culminating in the suspension of a Boards of Appeal member by the President, the question arises to what extent the Statements of Position can form a suitable basis for the Court’s decision at all.

Ingve's conclusion is as follows:

The presented Opinions are not convincing. When comparing them to the Opinion from proceedings 1/09, which addressed the existing problems in all their clarity, they rather seem to endeavor avoiding any confrontation with the controversial issues and to seek to easiest way to come to a rejection of the complaints. The impression arises that it is sought to achieve a predefined result, without having well-founded arguments supporting it. This may imply that a serious discussion of subject matter is possibly not wanted, because all the institutions involved anyhow wish to nod the package through.

One decisive aspect will be whether, despite the neglect in dealing with this issue in the Opinion, the CJEU will be prepared to tackle the situation at the EPO. Should they avoid this or not deal with it exhaustively, the focus will shift to the national Constitutional Courts for this examination, especially to the German BVerfG due to its mentioned powers to review ratification statutes. Since ratification by Germany is obligatory for the UPCA to enter into force, a veto by the BVerfG would stop the whole project. Already for this reason, it will be interesting to see how the CJEU will deal with Spain’s actions. Its judgments should be given in spring 2015.

PatLit looks forward to reading Ingve's comments when the CJEU finally gives its decision.

Granting of Apple Patent makes GoPro share price drop

There has been some dispute on how the news that a company is sued for patent infringement influences the share price (in particular in the context where the plaintiff is a so-called troll, see here).

Today's news is that not a legal action but merely the publication of a decision to grant a US patent relating to an action camera system to Apple Inc. made the share price of the "action camera" producer (and market leader) Go Pro dramatically drop. Indeed, the share value of GoPro dropped by roughly 13% on Tuesday.

Looking at the 1 month chart (right), the development appears less dramatic and well within the order of magnitude of typical fluctuations.

A further interesting point is that the patent specification specifically mentions drawbacks of GoPro products (this not being a surprise given that GoPro is the market leader). This is interpreted by the jounalists in such a way that Apple has specifically targeted GoPro. An interesting case on how and why the mentioning of drawbacks or problems of competitor's products in a patent specification may harm a company's reputation and be unfair competition (and what the company can do against this) was reported here.

The secretive business attitude of Apple promotes speculations on potential new business fields in an extreme way and the mere publication of patent application has already been the basis for business news created by journalists reading the tea leaves and subsequent hysterical reactions earlier. However, the huge impact on a specific stock price of a third party is a new and scary development for me. After all, patent documents are not meant to be business news.

T1071/06 - Jilted in Munich

As a rule, each party bears its costs in EPO opposition proceedings and the subsequent appeal. However, the opposition division or the Board of Appeal may order a different apportionment for reasons of equity (Art. 104(1) EPC), which happens very rarely.

In the case T1071/06 the board had issued a preliminary opinion indicating that a document D0 would be considered as the closest prior art and the preliminary view was that the claims were inventive over D0. In response to this, frustrating punch, the opponent/appellant indicated one month after receipt of the summons that it would not attend to the oral proceedings.

The patentee/defendant attended to the oral proceedings alone and requested to impose the costs for the preparation and attendance to the oral proceedings to the appellant because the remaining issues could have been resolved in writing if only the opponent/appellant had given up earlier.

The board found that the appellant's behaviour was not abusive but that it is fair to grant each party the right to re-consider its case after receipt of the preliminary opinion. Besides, the oral proceedings would have been expedient in any case to resolve the remaining issues.

Disclosure of customer names and reputational concerns: Wobben gets its way

Wobben Properties GmbH v Siemens Public Ltd Company and others [2014] EWHC 3173 (Pat) is a Patents Court, England and Wales, decision of Mr Justice Morgan that dates back to early December of last year. Sorry about the delay in blogging it, but we are all over-stretched and this blog desperately needs more blogging fire-power. This decision is one of the many which deal with the nuts and bolts of procedural issues in pursuit of enforcement at national level.

Wobben, which held a European patent -- which was soon to expire -- for a method of operating a pitch-controlled wind turbine, maintained that Siemens had infringed its patent by making, marketing and supplying wind turbines to its customers which incorporated that patent's technology. The seven other defendants were said to have infringed the patent in the course of developing various wind farms which used Siemens' wind turbines or by installing wind turbines for Siemens and other defendants. Inevitably the defendants challenged the validity of Wobben's patent.

Wobben was concerned, that even if it succeeded against Siemens and the other seven defendants in this action, it might still have to press ahead with legal action against the end users of the technology, because the use of the technology was so very profitable. While Wobben had identified Siemens' customers within the jurisdiction, it didn't want to sue them all -- just those which had used the technology. It therefore wanted Siemens to identify the instances in which the technology had been activated so that Wobben could invite them to be bound by the decision in this action or to be joined as parties to it, thereby saving time and costs. Wobben therefore applied for a Norwich Pharmacal order that Siemens disclose the names of the customers concerned.

Siemens resisted the application, arguing that the disclosure of the information would cause it reputational damage.

Morgan J granted the application. In his view:

* the jurisdictional requirements for making a Norwich Pharmacal order had been made out. If the technology had been activated, resulting in its use by a customer, there was an arguable case of infringement which Siemens would have facilitated; Siemens had the information that Wobben asked for, and Wobben was not able to know which customers had arguably committed patent infringement by using the technology unless Siemens told it that which customers the technology had been activated for

* in proceedings against the end-users, the time and resources of Wobben and of the court would be wasted if the issue of the patent's validity were to be raised again.

* As for reputational damage likely to be suffered by Siemens, it was actually the case that Siemens ran a higher risk of exposure to even greater reputational damage, involving more customers, if it didn't provide the information sought. This was because Wobben was likely to make claims against more customers if it didn't know which ones to sue than it would if Siemen eliminated the customers which had not used the technology.

* it was not appropriate to have a mini trial in relation to the assertions and counter-assertions about reputational damage. Rather, the court should simply assess the likelihood (or risk) of serious harm coming about. On this basis Siemens would be better off if the court made the order sought, leaving it to Siemens to put its own spin on it via its own customer communications.

* while Wobben could could have made its application sooner, it would be disproportionate to deny it a Norwich Pharmacal order on the ground of delay.

This decision seems to be a sensible and practical one, particularly when viewed from the perspective of the efficient use of the court's time and resources -- an issue that the House of Lords did not consider when it first contemplated the availability of such orders back in 1973.

Patent litigation and cost shifting in Europe: a new article

"Patent litigation and cost shifting in Europe: critical appraisal and proposal of alternative solutions" by Filipe Fischmann (Research Fellow, Intellectual Property and Competition Law, Max Planck Institute for Innovation and Competition), has today been published online for the benefit of e-subscribers to the Journal of Intellectual Property Law & Practice (JIPLP). You don't have to be a regular subscriber to read it, though, since non-subscribers can purchase limited-time access to it from the JIPLP website here. According to the abstract:

"This article analyses different costs rules and practices regarding patent litigation in Europe, explains the functions played by cost-shifting provisions and proposes the introduction of a modulated two-way fee-shifting system, in order to enhance patent litigation".

The author concludes:

Cost shifting is one of the fundamental elements of litigation, as it represents an important element in the decision to go to court. In Europe, the Enforcement Directive tried to harmonize national costs rules, but they, and the respective practices, are still particularly divergent among EU Member States, as the analysis showed. The different systems adopted by Germany and England and Wales show that each scheme has its advantages, but also some shortcomings. Although one Member State can learn from the practice of the others, its own tradition may represent a barrier to the implementation of alternative solutions.

However, the creation of the UPC represents an exceptional opportunity for the adoption of new measures on litigation rules in general and also on cost-shifting provisions in particular. Although the different traditions of each Member State may and should be considered, the creation of the UPC could allow the adoption of creative measures, as long as they comply with EU rules. The UPC should therefore make use of costs scales, profiting from the German experience, and of an issue-based approach, benefiting from the English and Welsh practice. Moreover, the UPC should reformulate the English and Welsh experience with certificates of contested validity and create a modulated two-way fee-shifting system, which may help improve the patent system.

This is obviously of interest to readers of PatLit who litigate patents in Europe, or may find themselves doing so under the new European patent regime in the near future.

Supreme Court To Hear Challenge To Brulotte Rule

On December 12, 2014, the U.S. Supreme Court granted certiorari in the third patent case to be heard this term, this one presenting an issue at the intersection of patent law and antitrust law. In Brulotte v. Thys Co., 379 U.S. 29 (1964), the Supreme Court ruled that a patent license requiring the licensee to pay royalties after the licensed patent expires is a per se violation of the antitrust laws. In addition, the same conduct constitutes patent misuse, and may render a patent unenforceable in a subsequent infringement action. Now, 50 years later, the petitioner in Kimble v. Marvel Enterprises, Inc., No. 13-720, asks the Court to overturn that per se rule. 

Kimble is the inventor of a "Spiderman" toy that allows children (and perhaps some adults) to shoot foam webs from their wrists. He licensed the patent to Marvel. The license included a royalty based on sales of the toy, but did not provide for the royalties to end when the patent expired. Marvel relied on Brulotte to stop paying post-expiration royalties.

The Brulotte Rule has been widely criticized as outdated. For example, Scheiber v. Dolby Labs., Inc., 293 F.3d 1014 (7th Cir. 2002), Judge Richard Posner criticized the rule as being wrong, lamenting that the Seventh Circuit had “no authority to overrule a Supreme Court decision no matter how dubious its reasoning strikes us, or even how out of touch with the Supreme Court’s current thinking the decision seems.” The U.S. Department of Justice and Federal Trade Commission also have criticized the rule in recent guidelines analyzing anticompetitive provisions in intellectual property license agreements. In recent years, the Supreme Court has modernized its analysis of antitrust concerns relating to intellectual property. See, e.g., Illinois Tool Works, Inc. v. Independent. Ink, Inc., 547 U.S. 28 (2006) (overruling its prior decisions that, in an antitrust tying claim, a patent does not necessarily confer market power upon a patentee). The Kimble case may be a vehicle for it to dispense with the Burlotte rule as well. Oral arguments have not been scheduled.

DDR Holdings: A New Perspective On Patenting Internet Processes?

The Supreme Court’s decision in Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) created perplexing issues for those hoping to patent computer-implemented processes and associated systems. The Court described a potentially broad (but effectively undefined) notion of “abstract ideas,” and held that a patent that implicates an abstract idea is eligible for patenting under 35 U.S.C. § 101 only if the claims recite an “inventive concept” that restricts the claimed subject matter to something significantly different from the abstract idea per se. Routine and conventional computer hardware and functions are insufficient to provide this inventive concept.

Following Alice, a series of cases have invalidated patents covering computer-implemented inventions as ineligible abstract ideas. Ultramercial, Inc. v. Hulu, LLC, ___ F.3d ___, 2014 WL 5904902 (Fed. Cir. Nov. 14, 2014)(process for using advertising as a currency for accessing media content over internet); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014)(use of computer to create a transaction performance guaranty); Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013)(system to perform insurance-policy-related tasks on a computer); Bancorp Servs. LLC v. Sun Life Assur. Co. of Canada, 687 F.3d 1266 (Fed. Cir. 2012)(use of computer to perform repetitive insurance value computations). In light of those decisions, the outlook for internet-related computer patents appeared bleak.

On December 5, however, the Federal Circuit signaled that some hope still exists by affirming the eligibility of a software patent involving commerce on the internet. DDR Holdings, LLC v. Hotels.com, LP, No. 2013-1505 (Fed. Cir. Dec. 5, 2014). Slip opinion HERE. In a 2-1 decision written by Circuit Judge Chen, the Federal Circuit ruled that an invention directed to merchandising on the internet was patent-eligible.

DDR concerned U.S. Patent No. 7,818,399 (entitled “Methods of expanding commercial opportunities for internet websites through coordinated offsite marketing”). The ‘399 patent addressed the problem facing internet stores with websites that include ads for third-party merchants. In prior art systems, a customer clicking on an ad on a host website would be directed to a third-party site, often being lost to the host site forever. The ‘399 patent claims a process involving stored data concerning the visual elements responsible for the “look and feel” of the host website, so that upon clicking an ad the customer is directed to a webpage on the host website that is a composite of the third-party merchant’s product information and the look and feel elements of the host website.

The Federal Circuit applied the two-step test for patentability set forth in Alice. First, it considered whether the ‘399 patent claims were directed to a patent-ineligible abstract idea. It noted that distinguishing between a patentable invention and an abstract idea “can be difficult, as the line separating the two is not always clear.” Slip op. at 16. After reviewing Supreme Court cases characterizing (without defining) abstractness, the Federal Circuit side-stepped the issue by noting that, even if the ‘399 patent claims included abstract ideas, they nonetheless were saved by step two of the Alice analysis.

In step two, the court must “consider the elements of each claim—both individually and as an ordered combination — to determine whether the additional elements transform the nature of the claim into a patent-eligible application of that abstract idea. This second step is the search for an ‘inventive concept,’ or some element or combination of elements sufficient to ensure that the claim in practice amounts to ‘significantly more’ than a patent on an ineligible concept.” Id. 16, quoting Alice, 134 S. Ct. at 2355.

The Federal Circuit ruled that, although the ‘399 patent was directed to internet commerce, it was limited to a particular application of any broad, abstract concept: 

As an initial matter, it is true that the claims here are similar to the claims in [earlier cases finding patents ineligible] in the sense that the claims involve both a computer and the Internet. But these claims stand apart because they do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet. Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.  

In particular, the ’399 patent’s claims address the problem of retaining website visitors that, if adhering to the routine, conventional functioning of Internet hyperlink protocol, would be instantly transported away from a host’s website after “clicking” on an advertisement and activating a hyperlink. For example, asserted claim 19 recites a system that, among other things, 1) stores “visually perceptible elements” corresponding to numerous host websites in a database, with each of the host websites displaying at least one link associated with a product or service of a third-party merchant, 2) on activation of this link by a website visitor, automatically identifies the host, and 3) instructs an Internet web server of an “outsource provider” to construct and serve to the visitor a new, hybrid web page that merges content associated with the products of the third-party merchant with the stored “visually perceptible elements” from the identified  host website. 

Slip op. at 20. The court distinguished Ultramercial, a recent case holding that an-Internet based process was ineligible: 

Unlike the claims in Ultramercial, the claims at issue here specify how interactions with the Internet are manipulated to yield a desired result—a result that overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink. Instead of the computer network operating in its normal, expected manner by sending the website visitor to the third-party website that appears to be connected with the clicked advertisement, the claimed system generates and directs the visitor to the above-described hybrid web page that presents product information from the third-party and visual “look and feel” elements from the host website. When the limitations of the ’399 patent’s asserted claims are taken together as an ordered combination, the claims recite an invention that is not merely the routine or conventional use of the Internet. 

Id. at 22-23. As a result, the court ruled that the process was eligible under §101. Circuit Judge Mayer dissented, arguing that the ‘399 patent was “long on obfuscation but short on substance[,]” and that the invention disclosed was “so rudimentary that it borders on the comical.” He interpreted Alice to create a “technological arts” test for eligibility, which was not met because the ‘399 patent was not rooted in any new computer technology.