At the recent meeting of the Competitiveness Council, the EU member states failed to reach agreement on the timing and effect of the translations of the claims of a granted Community patent (CP). As a result, the proposed Regulation on a CP will not be adopted by 1 May 2004 after which unanimous agreement is likely to become even more difficult to reach given the addition of the 10 new EU member states at the negotiating table. At present, the EU Commission is taking stock of the situation and deciding how to proceed. It seems likely that they will at least try to obtain agreement at the next meeting of the Competitiveness Council later this year.
If the EU Commission succeed and CP becomes a reality in the course of the next few years then users of the patent system in Europe will be faced with having to decide in respect of the European Union (EU) whether to obtain patent protection by means of national patents, European patents (EPs) or a CP.
Whilst there is and probably will remain a role for national patents, for most users the choice will be between EPs and a CP. Given that the European Patent Office (EPO) will handle the prosecution of both EPs and the CP, the decision as to whether to obtain EPs or a CP will be based primarily on 3 factors: validation costs, renewal fees and effectiveness of the enforcement regime.
That choice is critical because once the choice has been made (or at least the translations have been duly filed), there is no turning back. Unlike the Community Trade Mark, once granted it is not possible to convert the Community Patent into a bundle of EPs (or national rights) for any reason.
In the case of EPs, to validate in a designated state in which protection is required on grant, it is currently necessary to translate the specification into the EU Official Language (OL) of that designated state (unless of course the specification of the granted patent is already in that language which it might be for English, French or German these being the 3 EPO OLs.)
This is a costly exercise and is the main reason why the cost of obtaining patent protection in Europe is greater than that of either the US or Japan even bearing in mind the relative sizes of these 3 markets. If the London Agreement to the European Patent Convention (EPC) were to come into force then at least for the contracting states to the London Protocol, the specification would only need to be translated into the 2 other EPO OLs (than the one in which it was prosecuted) in order to be validated in those contracting states. The cost of obtaining protection by means of EPs would thereby be reduced significantly.
In the case of a CP, to validate in the EU, it is going to be necessary to translate the claims into the EU OLs of all of the EU member states. If the translated claims are to have some legal effect (which at present seems likely) and therefore mechanical translations are not going to be practicable then it is an open question as to whether the costs of validating a CP with claims of average length will be more or less than the costs of validating a bundle of EPs in an average number of EPC contracting states. On the Commission’s calculations, the validation costs will favour the CP. The Commission’s calculations however depend on a number of assumptions. In practice, the relative costs of validating each will turn on the actual length of the claims and the actual number of designated states in which the patentee wishes to obtain protection. If the London Protocol comes into force then even on the Commission’s calculations, the costs of validating an average length CP or an average bundle of EPs will be approximately the same.
It is worth recalling that one of the driving forces behind the Commission’s proposal for a CP was the objective to bring the cost of obtaining protection in the EU down to the same level as that for the US and Japan. The political compromise reached on language means that they have singularly failed to achieve this objective. The proposal for a CP itself was one of the package of proposals agreed at the Lisbon Summit in June 2000 as the means of making the EU the most competitive economy in the world by 2010. The irony of the CP proposal as it currently stands is that it is likely to benefit least those who it was intended to benefit most, namely small and medium sized enterprises.
It is understood that the Commission intend to set the renewal costs of a CP at the same level as those for renewing a bundle of EPs for 10 years validated in the average number of 8 EPC contracting states. In fact, it remains to be seen whether this will be achieved. If, in relation to a CP, additional burdens are placed on the EPO post-grant, the EPO’s post-grant costs for a CP may be higher than those for an EP. These additional costs may in turn have to be passed on to the patentee as the EU member states are likely to continue to demand the same level of remuneration from CPs as they currently enjoy for EPs.
The advantage of the EP of course is that of flexibility i.e., the patentee can decide to allow the EP to lapse in any EPC member state by not paying the renewal fees. That option will not be available for the CP which is a unitary right.
The fact that as it currently stands there is unlikely for most industries in most cases to be a significant cost benefit in opting for a CP as opposed to a bundle of EPs either in terms of validation or renewal means that the spotlight has been thrown onto the CP enforcement system as the major advantage in obtaining a CP. As explained below, the difficulty here is in being able to assess now how effective the CP enforcement system will in practice be in the future.
EP Litigation System
In the case of EPs, as a general rule, enforcement must take place before the national courts on a country by country basis. The exception to this general rule is that in some countries, notably Holland, it is possible for a patentee in certain circumstances to obtain cross-border relief.
The present system is generally perceived to be lacking in two respects. First, the need for multiple litigations in the national courts of each country is arguably more costly than it would be if only a single litigation was needed in order to obtain pan-European relief. Furthermore, the fact of multiple litigations gives rise to the possibility of inconsistent decisions from different national courts which firstly, creates uncertainty for users and secondly, is incompatible with the objective of creating a single market.
It is submitted that these perceived drawbacks are exaggerated.
As regards the need for multiple litigations, in practice a positive result in one or two key EU jurisdictions is normally sufficient to secure European wide-protection. This is so for two reasons. First, national courts take notice of the decisions of courts in other EU jurisdictions particularly the decisions of appeal courts and particularly decisions from the UK, Germany and Holland which are fully reasoned. Second, in an increasingly global economy, preventing a defendant from marketing their product in one key European jurisdiction in effect prevents the defendant from pursuing a European marketing strategy and thereby brings about a resolution of the litigation across Europe.
As regards the risk of inconsistent decisions, whilst there have been one or two well-publicised cases of inconsistency in the past, it is submitted that a close examination of even those particular cases does not establish that the “harmonised law on construction” was not having the desired affect in terms of the end result. In any event, the courts of both the UK and Germany, arguably the two most influential patent jurisdictions in Europe, are showing a willingness to begin to formulate their approaches to the issue of construction (fundamental to all patent disputes) in a similar way thereby enabling comparisons to be made and ensuring consistency in terms of result. It needs to be borne in mind that the split infringement/validity system in Germany as opposed to the unified system in England is unavoidably going to lead to some differences in approach.
In many instances, therefore, a patentee has the choice of starting actions in one or more of several competing courts each of which are able to offer the patentee a slightly different service. A few examples comparing and contrasting the procedures of the German and English courts help to illustrate the point.
In Germany, infringement and validity are heard in two separate actions before different Judges in different Courts. This split system can in some circumstances be used by the patentee to his advantage. A patentee with a patent that is not being attacked for anticipation should be able to resist an application to stay the infringement proceedings pending the outcome of an opposition or nullity action and will normally obtain a trial on infringement within a reasonable time frame (9-12 months). If he succeeds on infringement then he will have a judgment which will be enforceable pending an appeal subject to the provision of security and in many cases because of the timing of the opposition or revocation action, this will be the case without the validity of the patent having been considered by a court. The enforcement of a judgment in these circumstances will often bring about a resolution of the litigation favourable to the patentee.
In England (& Wales), infringement and validity are heard in the same action and therefore before the same Judge in the same Court. A patentee will normally be able to resist an application to stay the infringement proceedings pending the outcome of an EPO opposition. A patentee will be able to obtain a trial on both infringement and validity within a reasonable time frame (9 – 12 months). If he succeeds on infringement and validity, he then possesses not only a Judgment that can normally be enforced in England pending an appeal subject to the provision of security but also a fully reasoned judgment on both infringement and validity which he can export to other jurisdictions. The common law procedures applied by the English courts can also be used by the patentee to his advantage. A patentee has the ability to commence an action based on a reasonable inference of infringement and then seek to substantiate his claim by obtaining disclosure of documents and inspection of products and processes from the defendant. The power of the German courts to make such evidence-gathering orders is much more limited.
If a judgment is appealed in Germany, the appeal is more by way of a rehearing than a review, the appeal court will often appoint a technical expert to assist it and the threshold for submitting fresh evidence is fairly low. It also needs to be borne in mind that because of the split system, a piece of patent litigation in Germany may involve as many as 5 hearings (3 on the infringement side and 2 on the validity side) and will frequently involve as many as 3 or 4 hearings.
In England by contrast, the appeal process is more limited. For a start, there is normally only one appeal hearing on both infringement and validity to the Court of Appeal. The appeal is by way of review rather than rehearing and the threshold for introducing fresh evidence on appeal is high. The appeal normally comes on for a hearing within 9 – 12 months of the first instance Judgement. For all of these reasons, the appeal process in Germany can therefore take relatively longer and also involve relatively more expense than is the case in England.
One of the advantages of the EP enforcement system therefore is the ability for the patentee (or in some cases the putative defendant) to choose the jurisdiction that provides the service best suited to the circumstances of his particular case. Furthermore, because the national courts are effectively competing against one another for business, there is an incentive for them to improve that service.
One final thought. If the ECJ were to hand down a judgment approving of the approach adopted by the Dutch courts in relation to the grant of pan-European relief then the relative effectiveness of the EP litigation system would be markedly improved. So far, no references from the national courts on the point have reached the ECJ. There is however at least one reference pending from the German courts. The outcome of that reference can be expected with interest.
CP Litigation System
Despite publishing their proposal for a CP back in the summer of 2000, it was not until the end of 2003 that the Commission finally published their proposals for the establishment of the new Community Patent Courts (CPC) and the Protocol relating to the jurisdiction, composition and organisation of the new CPCs and also the procedure before them. The Protocol itself is to be incorporated into the existing Protocol of the Statute of the Court of Justice by way of an annex as was done in the case of the Court of First Instance.
A summary of the main elements of these proposals is set out below.
Jurisdiction and Court Structure
The ECJ will be given exclusive jurisdiction over the determination of the issues of infringement and validity of CPs and the relief to be granted in consequence upon the exercise of that jurisdiction.
A new judicial panel called the Community Patent Court (CPC) is to be established within the ECJ to hear trials at first instance. The CPC will have its own Registry separate from the ECJ and the CFI.
Appeals from the CPC will be heard by a special chamber to be established within the CFI.
The substantive law relating to infringement and validity has previously been set out in the Commission’s proposal for a Regulation on the CP. To a large extent, the law is the same as that currently applicable in most EU member states being based on the substantive law provisions of the EPC and the CPC.
Judges and Technical Advisors
The trial before the CPC will be heard by a panel of 3 Judges assisted by a technical expert or Assistant-Rapporteur. The proposed mechanism to appoint the Judges is intended to ensure that they are competent patent lawyers.
It is worth noting that members of the EPO Board of Appeal as well as academics would meet the proposed level of experience for Judges and that also that EPO examiners would meet the proposed level of experience for Assistant-Rapporteurs.
Interim applications may be heard by a single Judge and (presumably for hearing important issues of law) the Judges can sit in an enlarged configuration (much like the Enlarged Board of Appeal of EPO).
The parties must be represented by a lawyer who is authorised to practice in a member state of the EEA. The lawyer may be accompanied by a European Patent Attorney (who is also a national of a member state of EEA).
The Protocol for the CPC sets out the framework of the rules of procedure. The more detailed rules of procedure will be written by the Judges appointed to the new courts once they are established. These detailed rules of procedure will not therefore become known for several years.
The action will comprise two principal stages: a written stage in which the parties will exchange pleadings setting out their arguments and the evidence in support followed by an oral hearing at which the Judge-Rapporteur will present the main features of the case and the Court will then examine the evidence and hear the arguments of the parties.
In the first instance, the evidence submitted by the parties in support of their case will comprise documents in their possession, statements from witnesses and reports from experts who they have retained to assist in the litigation.
It is unclear from the Protocol the extent to which the Court will expect the parties to attend on a preliminary hearing in order to manage the future conduct of the action through to the oral hearing. This may be the subject of the more detailed rules of procedure to be written at a later date.
Unfortunately, the Protocol has apparently limited the otherwise wide power of the CPC to order disclosure of documents from a party to circumstances where “… a party has presented reasonably accessible evidence sufficient to support its claims and has, in substantiating those claims cited evidence which is to be found under the control of the opposing party… ”. It is submitted that this power will in most circumstances be of limited use given the threshold which has to be reached before the court can be asked to exercise its discretion to make an order for disclosure of documents - if a party has reasonably accessible evidence sufficient to support his claim then in most circumstances, he would have no need for documents to be disclosed from the other party to enable him to prove his claim.
On the other hand, the Protocol has given the CPC the power to make an order for a “saisi” both “description” (i.e., a detailed description of the evidence and taking samples) and “contrafacon” (i.e., seizure of infringing goods and documents). Unfortunately, the rules have limited the power of the Court to make such an order to circumstances “… where there is a demonstrable risk that evidence may be destroyed…” It is submitted that that this power will also be of limited use as the parties to most patent actions are reputable companies where the risk of evidence being destroyed is low. This is certainly the experience in England where Anton Piller or search and seizure orders are available but seldom if ever made in patent actions.
Although the Protocol of the Court of Justice giving the ECJ the power to appoint an expert is applicable to the CPC, it would seem unlikely that this power would be exercised by the CPC given that the CPC will be assisted in its deliberations by permanently appointed technically qualified Assistant-Rapporteurs.
The CPC has the power to hear witnesses (and therefore party-retained experts) at the hearing. There is no explicit provision providing the parties to the action with the right to cross-examine the witnesses (or party-retained experts) of the other party.
There are no explicit provisions dealing with experiments. It seems that the CPC will not therefore have the power to order a repetition of experiments. The parties will therefore be left to criticise any report of experiments submitted by the other party as part of their written evidence in support of their case based purely on the face of the submitted report.
Last but by no means least, the language of the proceedings will be the EU OL of the member state where the defendant is domiciled unless the parties agree to a different EU OL. It is not clear from the Protocol what will happen if there is more than one defendant. Perhaps, this will be clarified in the detailed rules of procedure to be written at a later date. This means that all of the pleadings and supporting documents will need to be translated into that language and the hearing itself will be conducted in that language with simultaneous translation into all of the other languages used by the parties, the Judges and the witnesses (if being heard).
The Protocol provides the CPC with the power to order any interim measures such as interim injunctions as it deems necessary both before and after the action has been commenced. There is no express provision relating to the provision of security to protect the interests of a defendant as a condition of obtaining e.g., an interim injunction despite such a provision being made in relation to the enforcement of a judgment pending an appeal. In the event that the interim measure is revoked, the CP does have the power to order the claimant in whose favour the measure was ordered to compensate the defendant for any injury caused by the imposition of the measure.
The CPC has the power to order a stay of an action pending the outcome of an EPO Opposition and also an appeal to the CFI where the validity of the same patent is in issue or an appeal to the ECJ in which same issue of interpretation is raised.
Court Costs and Recovery of Costs
The Protocol provides that court fees will be payable by the applicant. The scale of those fees is not yet known.
The CPC will have the power to award costs at the end of an action. Again, the level of recovery of costs is not known.
Appeals against final decisions and also interim decisions relating to interim measures and enforcement can be brought as of right to the CFI on matters of both fact and law.
The right to appeal against other interim decisions will be the subject of the detailed rules of procedure to be written at a later date.
There is no right to appeal against decisions on costs.
The appeal itself appears to be by way of a rehearing rather than a review of the decision of the CPC at first instance. However, fresh evidence may only be introduced on the appeal if its submission “… could not reasonably have been expected during the proceedings at first instance.” It remains to be seen how difficult it will be to introduce fresh evidence on appeal and also the mechanics for so doing i.e., would the application be heard at the same time as the appeal or beforehand and if beforehand, by the same Judge(s) who will be hearing the appeal or different Judge(s).
Both the Commission and the member states have the right to intervene in an appeal.
Pending the outcome of the appeal, the enforcement of the CPC judgment is normally suspended although the CPC has the power to order that its judgments are enforceable subject to the provision of security by the winning party.
Compliance with an order of the CPC will be enforced by means of the payment of a penalty.
As a practical matter, orders of the CPC will be enforced by the national courts of the EU member states.
It is submitted that the main areas of uncertainty for a user of the CP litigation system as it stands at the moment are the following:
Language: The fact that the language of the proceedings is that of the defendant is likely to make the proceedings cumbersome and therefore slow and expensive. The problem is that one of the most important issues for the CPC will be that of construction of terms in the language in which the patent was prosecuted. If the defendant is not domiciled in a country having the language in which the patent was prosecuted as its EU OL then this exercise will be done primarily in another language. The result is likely to be “defendant” shopping so that the applicant can ensure its language of choice for the proceedings.
Evidence-Gathering Mechanisms: The fact that the CPC’s evidence-gathering mechanisms are so limited is likely to make it difficult in certain circumstances for the patentee to prove his case. The English courts have the power to order the production of documents and inspection of products and processes. The French, Belgian and Italian courts have the power to order a “saisi”. The Protocol has given the CPC both of these powers but then fettered the CPC’s exercise of them. In practice, it is likely that they will be of little if any value.
Role of Assistant-Rapporteurs: The use of Assistant-Rapporteurs is a novel departure at least as far as patent litigation in Europe is concerned. There would seem to be 2 interrelated concerns. First, the extent to which despite the fact that they do not have a right to vote, their views on matters outside their remit will influence the eventual outcome. Second, there are likely to be many cases coming before the court where the Assistant-Rapporteur whilst qualified in general terms in a particular area of science does not actually have the requisite level of expertise in the specific technology the subject matter of the patent in suit. There is no power for the Court to appoint an independent expert in those circumstances.
No cross-examination of witnesses/party retained experts: The inability to cross-examine the other party’s witnesses and expert and in that way test the strength of the other party’s evidence means that the forensic examination conducted by the Court is likely to be less thorough than is currently the case in say the English courts.
Appeal: The fact that the appeal is by way of a rehearing coupled with the right of the Commission and the member states to intervene coupled further with the right to introduce fresh evidence in certain circumstances will all tend to increase the length and cost of the hearing of the appeal. At the same time, the normal rule is any first instance judgment should be stayed pending the outcome of the appeal.
Cost: If the Commission remains of the opinion that there is a cost advantage to a patentee having to litigate only once in order to obtain pan-European relief then it is likely that the court costs will be set at a correspondingly high level.
The relative effectiveness of the two enforcement systems, EP (via the national courts) and CP (via the CPC), is going to be the most difficult factor to assess when the time comes for the user to decide whether to opt for a CP or a bundle of EPs. The Judges have yet to be chosen, the detailed rules of procedure have yet to be written and in any event, it is only once the CPC has been tried and tested for some considerable period of time that users will know with any reasonable degree of confidence how effective the CPC is going to be compared to the national courts.
The difficulties involved are thrown into stark relief by considering the position of the pharmaceutical industry. It is the one sector which probably has most to gain in terms of validation and renewal costs but most to lose in terms of enforcement if a patent covering a successful product is either lost (when it should not have been) or, almost as importantly, cannot be enforced effectively against competitors.
Leaving validation and renewal costs aside, do users opt for the flexibility of the tried and tested EP litigation system with the ability to choose between one or more national courts or do they opt for the uncertainties of the CP litigation system albeit with the certain prospect of pan-European relief if successful ultimately. Not a decision to envy.
First published in the June 2004 issue of Patent World #163.