An Overview of European Patent Litigation and Enforcement Measures for AIPLA Corporate Practice Committee Susan Kirsch, Partner October 2015.

An Overview of European Patent Litigation and Enforcement Measures

for AIPLA Corporate Practice Committee

Susan Kirsch, Partner

October 2015

A Comparison of the UK, German, and French Patent Courts

United Kingdom

The European Courts - UK court structure

Court of Appeal

Supreme Court

High Court (“Patents Court”)

IPEC

UK Intellectual Property Office

appeal

appeal

appeal

appeal (with leave; points of law only)

Transfer possible in some cases

Application for revocation only

* *

* Infringement action and/or claim/counterclaim for revocation

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UK - IPO• Normally validity-only cases

• Can hear infringement if both parties agree, but very unusual

• Primarily a written procedure, but hearings available• Hearings in 1 day, but no more than 2 days

• Disclosure requests possible, but unusual• “Specific” most likely; “standard” inappropriate

• Cross-examination available• Prior request required; normally allowed

• 6-10 months from initial claim to trial• Costs: £50-£150K for revocation only

• Recoverable costs are small, per fixed scale

• But off-scale costs (“approaching full compensation”) awardable proportionately for breaches of rules, delaying tactics, unreasonable conduct, etc.

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UK Courts

• Choice of courts:• Patents Court (High Court)

• Intellectual Property Enterprise Court (“IPEC”)

• Not bifurcated: infringement and validity together

• Quick to trial/decision (9 – 12 months)

• Discovery

• Evidence in chief in writing

• Expert evidence, comprehensive cross-examination

• Appeals are quick (~6 months)

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UK - IPEC or High Court?– IPEC

– Recoverable costs capped to £50,000 for the liability phase and £25,000 for the damages phase

– Damages awards are capped at £500,000 per action

– Pro-active case management – Two day trial maximum

– High Court – Unlimited damages– Pro-active case management (increasingly)– Costs recovery for successful party (~70%)

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UK - Preliminary Injunctions

– Preliminary injunctions rare in patent cases, except for certain pharma cases

– Test:– Serious issue to be tried– Irreparable harm– Balance of convenience

– Cross-undertaking in damages

– Speedy trial option available as an alternative to PI relief

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UK – Disclosure of documents– “All the cards on the table” – not as

burdensome as US discovery however more than elsewhere in EU (exception is Ireland)

– Requirement generally limited to two years either side of the priority date– If relevant, documents should be disclosed, even if

damaging to own case but cannot be used elsewhere without permission

– Obligation (ongoing) is to search for, and disclose, documents currently or formerly in a party's control though based on a reasonable and proportionate search

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UK - Experts– Detailed reports are evidence in chief– Oral cross-examination during trial– Duty of experts to help the court on matters

within their expertise– Skilled person or team – critical to get the

right expertise– Manner of instruction of experts is

increasingly scrutinised

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UK - Final Remedies– Injunctions – usually granted, but discretionary– Damages (compensate patentee for its loss)– – Lost profits (sales the patentee would have made)

– Lost sales (primary and ancillary)– Price depression– Springboard and post-expiry sales

– – Reasonable royalty (sales patentee would not have made)

– Account of profits (infringer's profit)– – Rare (infringer may deduct a proportion of its

overheads in addition to direct– costs)– Delivery up/destruction– Limited punitive damages

Germany

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The European Courts – Germany

• Preservation of evidence• Seizure orders

• Protective briefs

• Interim injunctions

• Bifurcated procedure - Infringement• Four main district courts - speed varies (~10-15 months)

• Very short trials (hours)

• Expert evidence rare, no cross-examination

• Invalidity arguments largely discounted

• Stay of injunction pending validity court ruling cannot be relied upon

• Düsseldorf very pro-patentee

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Germany - Bifurcation

• Bifurcated procedure - Invalidity• One court in Munich

• Slower than infringement courts (18-24 months)

• Will not rule if there is an EPO opposition on the same patent Appeals (so can be very slow)

• Take some time (~4 years)

• Still bifurcated at second instance

• Infringement and validity only combined in the Supreme Court

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Germany: Preliminary Injunctions

– Infringement must be reasonably clear– Validity must be reasonably certain:

– a decision in nullity or opposition proceedings, or– submissions filed by infringer in application process– arguments of infringer obviously without merit

– Timing: PI application must be filed within one month of notice/awareness of infringement, or patent was confirmed in opposition/nullity proceedings

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Germany: Final Remedies

– Injunctions– no discretion: granted if infringement found– non-compliance: fine/imprisonment

– Damages (compensate patentee for its loss)– lost profits (sales the patentee would have made)– reasonable royalty (sales patentee would not have

made)

– Account of profits (infringer's profit)– Delivery up/destruction– No punitive damages

France

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The European Courts – France

• Preservation of evidence• Saisie-Contrefaçon

• Protective letters

• Interim injunctions

• Not bifurcated

• Since 2009, one specialist court in Paris• Inexperienced first instance judges

• Court of Appeal more experienced

• No cross-examination

• Short trials

• Relatively inexpensive

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France: Preliminary MeasuresSaisie-contrefaçon– Saisie-contrefaçon – pre action seizure of

infringing materials– Aim: proof that on a certain date, infringing

acts took place in France by seizing samples, documents etc.

– Ex parte: authorized by the Court, executed by bailiff and an expert designated by plaintiff

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France: Preliminary Injunctions

– Usually granted inter partes.– ex parte possible but rare

– Infringement must be reasonably clear.– Court can:

– require patentee provide bond/security, as a condition of granting PI

– require alleged infringer provide bond/security, as condition of allowing continuation of alleged infringing acts

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France: Final Remedies

– Injunctions– usually granted if infringement found– non-compliance: fine/imprisonment

– Damages (compensate patentee for its loss)– lost profits (sales the patentee would have made)– reasonable royalty (sales patentee would not have

made)

– Account of profits (infringer's profit)– Delivery up/destruction– No punitive damages

Costs

An overview

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Costs– Enforcement Directive, Art. 14

– Unsuccessful party should pay “reasonable and proportionate legal costs and other expenses”

– UK – High: £150-300k (in IPEC) - £600k -several million (in High

Court)– In High Court, loser pays around 70% of winner’s costs, or costs

awarded on an issue by issue basis, and if not agreed, the court will assess costs

– IPEC, costs capped at £50k for liability stage/£25k for quantum stage

– Germany– Medium: €100k-over 1 million, but court fees higher than UK– Loser pays winner according to statutory limits, e.g. a modest

case costing €50k, loser will pay ~50 %

– France– Low: €50k-350k– Loser pays winner fees based on external counsels' fees and

disbursements, and the length and complexity of the case

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Stays

– If a patent is opposed at the EPO, will the national courts stay their parallel proceedings?– UK – in general, no, but see Actavis v Pharmacia.– Germany –

– bifurcated system.– Infringement court will only stay proceedings if the

invalidity argument is very strong.– Nullity court will not hear a national revocation action

while EPO opposition is pending.– France – in general, no.

European Patent Litigation

Statistics

Graham & Zeebroeck, 17 Stan. Tech. L. Rev. 655 (2014)** Data set: Darts IP database, 2000-2010

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The proposed Unitary Patent Court (UPC) Procedure

How will the UPC change things?

Why is the UPC a big deal?

• With the advent of the European Unified Patent Court, European patents will become enforceable across a single jurisdiction encompassing approximately 360 million people (approximately 400 million with Poland). This would be about equal to the U.S. market size, but patent litigation costs would be significantly less.

What the UPC offers

– All parties:– flexible language regime– same procedure everywhere

– emphasis on written submissions plus one day hearing– but discretion in procedural matters

– bifurcation, document production, use of witnesses/experts

– experienced judges and a technical judge if required– speed – 12 months – to judgment– single appeal court ensures harmonisation– one set of proceedings, one set of costs

– Patentees: enforcement (including PI relief) through a single court system in all relevant countries

– Defendants: one counterclaim or revocation action deals with all threats

CJEU on EU law issues

Court of Appeal

Central DivisionLondonParis

MunichLocal divisions Regional divisions

Appealfacts & law

limited procedural

appeals

Court Structure

Court of AppealLuxembourg

Legally qualified judge

Technically qualified judge

Optional technically qualified judge

Legally qualified judge (local)

Likely :Romania,

Bulgaria, Cyprus & Greece

Sweden, Estonia, Latvia & Lithuania

Czech republic & Slovakia

So far:England & Wales,

Netherlands, France, Germany

x4, Belgium, Finland, Denmark,

Ireland

So far, English an available language in

all courts except France

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What will each court do?– Court of Appeal

– Appeals from Central, Regional and Local divisions– Central Division

– Three locations: Paris (IT and technology), London (life sciences) and Munich (engineering)

– Actions for revocation or declarations of non-infringement in the absence of an infringement action

– Non-EU based defendants may be sued for infringement in Central Division

– Regional and Local divisions – Claimant may choose local or regional division to bring

infringement claim– Invalidity claims (with/without infringement claim) may be

transferred to the Central Division

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Anticipated UPC Timeline

EventWeeks to Trial(1 day trial)

Stage 1: Issue IdentificationClaim 52 weeks

Defence and Counterclaim

Response to Defence and Counterclaim

Stage 2: PreparationInterim Conference ~30 weeks

• Identify Issues

• Assess need for witnesses, experts, disclosure of documents, further evidence, separate hearings for cross-examination

• Encourage parties to discuss settlement

Stage 3: HearingsWitness/expert hearings (if any) ~15 weeks

Oral hearing (1 day)

Judgment

Stage 4: Appeal

12 months

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Types of UPC Action

• Infringement claims• Declaration of non-infringement• Invalidity/Revocation claims• In certain circumstances, infringement

claims and invalidity claims may be heard at the same time, or the court may bifurcate the claims and hear them separately

UPC – Bifurcation

• Bifurcation of infringement/validity• Article 33.3 of the UPC Agreement – whether to

bifurcate or consolidate is left to the discretion of the local division

• Rules of procedure give no guidance except that infringement will be stayed if invalidity is highly likely – a difficult threshold to meet?

• Industry is against it; lawyers will make use of it. Forum-shopping will result

• Some local divisions could be pro-patentee caused by inter-division competition for patentee's business

UPC – Preliminary Remedies

• The UPC will have the power to:• order provisional measures to preserve evidence and the

inspection of premises, or “saisie-contrefaçon” (Article 60.1 and .3 of the UPC Agreement)

• order a party to produce evidence (Article 59 of the UPC Agreement),

• order a party not to remove assets from the jurisdiction, or “freezing orders” (Article 61.1 of the UPC Agreement)

• grant provisional and protective measures such as preliminary injunctions against an alleged infringer or any intermediary (Article 62.1 of the UPC Agreement)

• order the seizure or delivery up of suspected infringing products, seizure of property and blocking of bank accounts (Article 62.3 of the UPC Agreement)

UPC – Final Injunctions

• Expected to be issued as a matter of course

• Bifurcated proceedings:• May be issued anyway

• May be issued subject to the condition subsequent that the patent is not found to be invalid

• May be stayed and will be stayed if there is a high likelihood that the patent is invalid

• May be granted subject to a cross-undertaking

Unitary Patent – Revocation

• Minimising pan-European revocation at one sitting probably the most compelling reason for opting-out• Do you want to put your important cases at risk in an

untested court, and for all countries?

• Over time it seems likely that UPC case law will converge with national case law (same judges) so perhaps reasons for opting out decrease with time?• Even if UPC outcomes are similar to national courts, is

there a risk bias? Do you prefer:• 70% chance of winning in UPC

• Or win 7/10 times in national courts?

• EP and opt-out for important cases that are likely to be challenged?

Court fees and legal costs, May 2015

Consultation Paper

– Fixed court fees at each major stage e.g. for infringement, for counterclaim, for damages determination, for appeal – Infringement claim, DNI, or counterclaim €11,000– Revocation claim €20,000

– Value-based fees are payable in addition for infringement and counterclaim– Each party will assess value of case– Judge-rapporteur will decide value at the Interim

Conference– value €1m = fee €5,000– value €30m = fee €150,000– value > €50m = fee €220,000

– Possibility of reimbursement for withdrawal, early settlement, and use of single judge, and of reduced fees and legal aid for SMEs or persons without means.

Court fees and legal costs, May 2015

Consultation Paper

– “Reasonable and proportionate” costs recoverable by the successful party

– Recovery unlikely to be as high as in the UK (60-70%), but will be much higher than in Germany

Value of Action €

UPC € UK € Germany €

1M 150,000 60-70% ~25,000

5M 600,000 ~85,000

10M 800,000 ~160,000

30M 1M ~450,000

.50M 3M ~450,000

An Overview of European Patent Litigation and Enforcement Measures

for AIPLA Corporate Practice Committee

Susan Kirsch, Partner

October 2015