Moving to a single European patent system

September 2012 | 10QUESTIONS | INTELLECTUAL PROPERTY

financierworldwide.com

FW speaks with Richard Price, a partner at Winston & Strawn LLP in London, about Europe’s move to a single patent system.

FW: Could you provide a brief overview of the current patent system in Europe?

Price: Currently, patent applications are filed centrally at the European Patent Office. They can also be filed nationally according to the rules of individual countries. If the EPO chooses to grant, then the patent has effect in all the European countries the applicant has nominated. After grant, there is a nine month period in which anyone objecting to the grant can apply centrally to the EPO to have the patent struck out in all countries. This procedure can be lengthy, sometimes taking years, but is the only way in which a patent can be revoked across Europe at one stroke. A European patent can be thought of as a bundle of individual country patents. The effect is that litigation for infringement of the patent, or to revoke it, must be brought country by country. Different countries have different rules and procedures so forum shopping often goes on. For example, high patent infringement win rates in Germany, at over 60 percent, have made it attractive for infringement actions, whereas high rates of patent revocation or non infringement in England, at over 90 percent, have attracted parties trying to attack patents or clear their own products for sale.

FW: What factors have driven calls for the establishment of a single European patent system in recent years? To what extent was reaching consensus a torrid, drawn-out process?

Price: The overall perception is that having to litigate country by country is contrary to the fundamental principles which have driven the success of the European Union and the open market that is supposed to exist within it. Litigating country by country has been viewed as expensive and time consuming. For litigants, the system is viewed as overly complex and arcane. The uncertainty from contrasting decisions being made in different countries has meant that companies have been put off from enforcing their patents. Foreign litigants compare the European system with that in the US, where one court can rule for the whole country whose economy is of a similar size to the European Union and wonder why it cannot occur here. While everyone agreed this problem existed, there has never been sufficient political will to bring about the changes necessary. Harsh words have been spoken between the proponents of the various national systems. Users (the clients), judges and practitioners have all put forward different views as to what should be done. These views have evolved over time and are still often contradictory. For example, not all user clients welcome a pan-European system; many still want to play the forum shopping game. However, either patience has run out or a chance to resolve the issues has been identified. The pace has picked up with successive European presidencies prioritising the project and instilling the political will to breach the divides that exist. Of course, the application of political muscle has meant papering over some cracks in principle and detail that have yet to be filled in. When and how well this is done will determine the success of the system.

FW: What major changes can patent owners and litigants expect under the new system?

Price: The most important change is that cases can be brought, and decided Europe-wide. If a patent is found to be infringed, then a pan-European injunction to prevent further infringement can be granted. Damages for infringement will be calculated on sales made Europe-wide. On the other side of the coin, if a patent is shown to be invalid, it will be revoked throughout Europe at a stroke. The format of the final system is still very much in flux. However, there are many changes that are already known and others which can be guessed at. It is likely that litigation will be front-loaded, with a claimant having to file detailed arguments with supporting evidence at the outset. This may reward a well prepared litigant. It may disadvantage defendants. As for the courts, there will be Local or Regional Divisions and a Central Division. These will serve as first instance courts. States busy with patent litigation cases already – Germany, England, France, the Netherlands and Italy – will each have their own Local Division; the others will be grouped together into Regional Divisions. Challenges to the validity of a patent, or requests for a declaration of non infringement, as well as certain infringement cases, will go to the Central Division. There will be a centralised Court of Appeal. We do not know where this will be but probably where the Central Division is located. The ultimate Court of Appeal would be — if the EU Commission has its way – the Court of Justice of the EU (CJEU) in Luxembourg.

FW: Were there any specific, controversial issues on which EU leaders could not reach agreement?

Price: One major stumbling block is the role, if any, which the CJEU – the ultimate Court of Appeal on all disputes arising under EU law – should have in the new patent litigation system. A couple of key issues were fundamental to the controversy. First, the fact that the new system will be created under a Treaty rather than result from a Directive or Regulation of the European Union means there is a question over the CJEU’s jurisdiction in these cases. Second, the judges of the CJEU currently have no experience or expertise in patent law.

FW: Could you outline the division and functions of the new courts in Paris, London and Munich?

Price: It is currently proposed that the Central Division should be located in Paris. However, there will be two further ‘thematic clusters’ of the Central Division, in London and Munich. London will deal with patents related to pharmaceuticals and life sciences while Munich will host those cases relating to mechanical engineering. Paris as the home of the Central Division will provide the administration for the system and will deal with all other types of patent. These would include telecoms and IT, both of which have seen significant increases in litigation in recent years.

FW: Broadly speaking, could you shed some light on the new litigation procedures and their effect on existing and future European patents?

Price: Many judges and practitioners, including myself, have long thought that no unified system should be introduced before the fundamental rules of court procedure have been settled. While the detail remains in flux, the current proposals produce a litigation procedure with the following key points. First, both European Patents, subject to an opt-out and a transitional period, and the Unitary Patent Right (when available) will be covered. Second, decisions of the court will have effect across the whole region – for unitary patents decisions will encompass all participating EU member states, and for European patents will encompass all designated and participating EU member states. Third, nationally filed patents will remain outside the UPC jurisdiction. Fourth, trials should occur within 12 months of proceedings starting. Finally, trial lengths should typically be one to two days, but with flexibility for longer trials where the complexity or commercial importance justifies this.

FW: How may the new patent system affect non-EU countries?

Price: It will not directly affect patent litigation which is carried on outside the EU. However, all persons and companies, wherever they are resident, and who bring patent litigation under the new system, will be subject to its jurisdiction. So will defendants who are resident outside the EU but who carry on business within the EU. If the system is successful upon its introduction, it may attract more global companies keen to achieve a significant first strike who might previously have preferred to litigate their patents in the US or elsewhere.

FW: Overall, do you believe the new system will result in a more streamlined patents system? What practical complexities might undermine this goal?

Price: Only time will tell but I do have immediate concerns. One is the perpetuation of forum shopping, by giving the choice to parties between having litigation on infringement and validity dealt with in one and the same court and hearing on the one hand and, on the other, parties who elect to have them bifurcated with only validity going to the Central Division. This may result in parallel litigation running at different speeds. Another concern is the lack of a sufficient number of suitably qualified and experienced judges to deal with pan-European patent disputes. Further, the speed and quality of the appeal system is a concern. It is likely that the most experienced and qualified judges will be in the Court of Appeal – so far so good. The trouble would come, if the final court of appeal is the Court of Justice in Luxembourg. There are currently no suitably qualified and experienced judges there and its track record in speed is not encouraging.

FW: What scope do patentees have to opt out of the new system?

Price: There will be an opt-out available for European patents granted or applied for prior to entering into force of the new procedure. However, a formal election must be made before the end of the transitional period. That period is currently set at seven years, but may end up being extended. An opt-out may be withdrawn at any time: - in other words, the opting-out party can opt back in again.

FW: In your opinion, should companies take steps now to become acquainted with the new system before its planned implementation in 2014?

Price: Yes, companies should start preparing now. The decision to proceed with the system is not in the hands of lawyers: it will be political. Because the politicians have much else on their plates, their consideration is, perhaps understandably, simplistic. There will be political compromise. It is likely to be made with little warning. The pros and cons of using the new system are complex. There are likely to be different considerations for large, medium and small businesses, and in different industries. As always, the best commercial and legal decisions will be those that are well-informed.

Richard Price is a partner in the London office of Winston & Strawn LLP, the head of IP, and one of the UK’s leading patent and trademark litigators. Mr Price litigates all aspects of IP law and has a high success rate in securing victories for his clients before the highest courts, including the House of Lords (now the Supreme Court) and Privy Council. Mr Price’s IP practice focuses on representing clients on patents, trade dress, trademark, and copyright matters. He can be contacted on +44 (0)20 7011 8735 or by email: rcprice@winston.com.

THE RESPONDENT

Richard Price

Winston & Strawn LLP