IP litigation on all fronts

June 2017 | LEGAL & REGULATORY | INTELLECTUAL PROPERTY

Financier Worldwide Magazine

June 2017 Issue

Parties involved in intellectual property disputes used to merely file suit in the US district courts, where the plaintiff rights holder could obtain an injunction against future sales of infringing products and damages for past sales of products. The process was relatively leisurely, with decisions rarely issuing in less than two years, and often in three to four years, and generally US-centric, with corresponding actions filed in Europe or Japan in only a small percentage of cases.

However, this has changed, in major part because of two big changes in the patent laws. First, the US Supreme Court decision in Ebay, Inc. v. MercExchange LLC dramatically curtailed the ability of patentees to obtain injunctions in US district courts, and limited most of them to receiving damages only. The result of this decision was to switch the focus of patent litigation to the US International Trade Commission (ITC), a government agency which, among other things, investigates violations of intellectual property rights in what are termed “337 actions”.

If a party in an ITC action is able to demonstrate that its patent, trademark, copyright or trade secret has been infringed, the ITC will issue an order excluding infringing goods from the US; there is no question of having to receive damages instead, as the ITC cannot award damages for infringement. Moreover, ITC proceedings are speedy, with initial decisions issuing in a year, and extremely hard to stay because by law it must decide a case in 16 months or less. Thus, parties wanting to exclude competitors from the market or wanting a speedy resolution to their dispute flocked to the ITC.

A common strategy for intellectual property rights holders is to try to obtain the best of both worlds by filing an ITC action and district court case concurrently. The ITC case would be resolved earlier, giving the patentee an injunction as quickly as possible, while the slower district court case would allow the patentee to receive damages for past infringement. In addition, though the ITC’s decisions are not binding on district courts they are persuasive, so an ITC finding of infringement increased the odds of a positive decision in the district court.

The second important change was that the US Patent and Trademark Office introduced (in 2012) the Inter Partes Review (IPR) procedure for adjudicating validity. The IPR procedure is fast – parties obtain a decision in 12 to 18 months – relatively inexpensive, and allowed the accused infringer to stay any co-pending district court litigation while the IPR was pending, giving the alleged infringer an additional 12 to 18 months to sell its product on top of the existing three to four year district court time frame.

In addition, the IPRs, which examine patent validity under a different legal standard than the district courts or ITC, soon developed a reputation as a ‘patent death squad’, as a high percentage of patents involved in an IPR proceeding ended up being invalidated, at least in part. This provided accused infringers with a way to obtain a decision on validity without having to wait three to four years, and also gave them additional leverage over intellectual property rights holders, because a patentee who asserted its patent now faced a much higher risk of that patent being invalidated. The IPR proceeding was very popular with accused infringers and savvy companies accused of patent infringement now file petitions to start an IPR proceeding almost automatically.

Finally, there is the question of Europe, as even though infringement tends to happen worldwide due to the global economy and distribution of goods, the ITC and US district courts only address infringement in the US and provide no redress for infringement abroad. Thus, parties seeking to stop, or receive compensation for, infringement in European markets needed to file actions in each European country in which they wanted relief.

Patent actions in Europe can be challenging. Generally, decisions are only valid in the country of the court issuing the decision, and each nation has its own substantive and procedural laws. Traditionally, the majority of European patent infringement proceedings are brought before the German courts, where infringement and validity are decided by separate courts. The German infringement courts move quickly and in some cases an injunction can be granted in less than a year. The UK has also traditionally been a popular jurisdiction because its courts are relatively fast and are perceived as being less patentee friendly than other places. Soon there will be the additional option of filing an action before the Unified Patent Court, or UPC, which will arrive later in 2017, and will issue decisions on infringement and validity effective in all 13 member states.

In addition to providing the patentee with a wider scope of protection, filing an action in Europe can offer tactical advantages to benefit US litigation. For example, though the decisions of the German court are not binding on the US district courts, a finding of infringement or validity is very persuasive. Similarly, because a German decision can issue in 12 months, an accused infringer who is able to obtain a speedy decision of invalidity from a German court may then be able to take the decision to the US district court or ITC to persuade them to invalidate the patent.

Thus, patentees wanting to be compensated for or to stop infringement of their patents in the US are increasingly finding themselves fighting on multiple fronts – before the US district courts, the ITC, in an IPR and in European proceedings – simultaneously. This can be complicated and costly, and in addition bears additional risks, as admissions or a finding made in one case can impact the other proceedings worldwide. However, sophisticated parties who are aware of the nuances of each forum can maximise efficiencies, thereby decreasing costs and the chance of one proceeding hurting the others. Litigants in the US district courts and ITC can take steps to allow the discovery obtained in those proceedings to be used in the European action which reduces the burden of the European action and may streamline them. Similarly a finding by the German court that a certain claim is valid may be used to streamline an ITC case.

However, there are pitfalls for those who are unaware of the nuances of each forum. For example, in the US, one may prove patent infringement either literally or under the Doctrine of Equivalents. However, adopting a strategy that is reliant on the Doctrine of Equivalents is less helpful to a party when there is counterpart litigation in the UK, as the UK does not recognise the Doctrine of Equivalents and thus a finding of infringement under such a theory will have little impact on a UK court. Similarly, a US strategy for showing infringement of a pharmaceutical patent may not be transferred to Italy wholesale because in Italy chemical intermediaries are not patentable, while in the US they are.

In addition to the potential pitfalls due to the variance between the many forums, dealing with the multiple law firms involved can also cause hazards. For example, law firms which are not good at coordinating with each other may make statements in different proceedings which contradict each other, and will be used to harm the patentee in both forums. Similarly, US attorneys unfamiliar with German proceedings may make statements in US cases which will be used against their client in the German court. Accordingly, parties that are involved in high stakes intellectual property litigation, where such a multifront war is increasingly likely, are well served by obtaining counsel which has experience in the district courts, ITC, IPRs and in Europe, or has substantial experience with multinational disputes.

The modern intellectual property rights holder increasingly has to be prepared to fight on all fronts, international and domestic, and both in courts and in patent offices. While process can be complicated, there are steps litigants can take to maximise efficiencies and leverage the events in one proceeding to its benefit in the other proceedings.

Aarti Shah is a member of Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo. She can be contacted on +1 (202) 434 7408 or by email: ashah@mintz.com.

Aarti Shah

Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo