Cost specifications hinder final appeal decision
To increase the production of meat, these animals receive food containing the additive L-lysine, an amino acid that is an essential building block of proteins and helps optimise the growth of animals.
The production of L-lysine is therefore a profitable business. The Japanese company Ajinomoto is the world’s largest L-lysine producer and owner of three relevant European patents. The patents are registered for numerous countries, including The Netherlands, for the process of producing the amino acid L-Lysine using genetically modified bacteria.
According to Ajinomoto, the Chinese company Global Bio-Chem Technology Group (GBT) and its European distributors infringe the patents. Ajinomoto started legal proceedings against GBT. The Court of Appeal at The Hague recently rendered an interlocutory decision in the litigation. Ajinimoto stated that GBT directly or indirectly infringed its patents and asked GBT to cease and desist.
On December 22, 2007, the district court that originally took the case declared that it lacked jurisdiction outside The Netherlands. Furthermore, the court declared that GBT directly infringed two of the European patents in question, despite the absence of the full continuous DNA sequence in GBT’s L-lysine end product. With regard to the third patent, the court postponed ruling until the European Patent Office decides on the opposition procedure against it.
“Based on the Endstra case, cost estimates require a specification not only of the hourly rate and the hours spent on the case, but also a concrete specification of the activities. The courts are in general very strict when applying this legal standard because of the fundamental principle of hearing both sides.”
GBT appealed against this decision at the Dutch Court of Appeal in The Hague and claimed that the two patents it allegedly infringed are invalid because of a lack of inventiveness. The decision of the district court was followed for the most part by the court of appeal. Both parties produced various scientific articles to state their claims. But the court could not find any evidence in the article to demonstrate that the patents lacked inventive step. It upheld the findings of infringement, and agreed with the district court to defer ruling on the third patent until the EPO opposition decision.
The final decision of the appeal court has also been deferred to give the parties the opportunity to specify their costs in the proceedings. This decision changes the course set out by the Supreme Court in its famous Endstra case. In this case, it was decided that a cost award can only be allowed when the costs are specified promptly so that the opposing party can defend itself properly.
This is based on the Dutch Code of Civil Proceedings, the equivalent of Article 14 of the EU Directive on the enforcement of intellectual property rights. Based on the Endstra case, cost estimates require a specification not only of the hourly rate and the hours spent on the case, but also a concrete specification of the activities. The courts are in general very strict when applying this legal standard because of the fundamental principle of hearing both sides.
It is common for courts to reject the complete costs of the proceedings due to a lack of specification. In this case, Ajinomoto’s specification did not meet the requirements, and although the appeal court is aware of this strict interpretation, it gave Ajinomoto the opportunity to fulfil the obligations.
Patent litigation is expensive. Since Ajinomoto largely won the case, it is fortunate to get a second chance to specify its costs. Usually, the lower courts follow the strict interpretation formulated in the Endstra case. It therefore remains to be seen whether this decision will be followed by other courts.
