1 December 2010Patents

Judging dread: what is the EEUPC?

The Court of Justice (formerly the European Court of Justice) has a decision to make. It could ratify the Draft Agreement on the European and European Union Patents Court (EEUPC) and declare it compatible with EU treaties. The draft agreement, as it stands, makes provisions for a whole host of things that seem to divide the opinion of the companies and patent attorneys who might benefit from them.

The court could also go the other way. It could agree with Advocate General Kokott, who signed the opinion that decided that the draft agreement was incompatible with EU treaties. If the court agrees, this would mean that the current draft agreement would need redrafting—a process it has undergone several times already, over several years.

As options go, these do not seem like very good ones.

When the European Council requested the opinion of the former ECJ under article 3000(6) of the EU Treaty, it was responding to complaints from countries that the EEUPC draft agreement is illegal under EU law. It seems these complaints were backed by the Advocate General, who found that the draft agreement, among other things, proposed a prejudicial linguistic system and could not guarantee full implementation and respect for the rule of EU law.

Several things seem to be getting in the way of a patent litigation system that would affect many different companies, attorneys and inventors. But a new European litigation system needs to function correctly from the outset if it is going to be of any use.

If the price is right

The EEUPC seems to be a welcome and necessary prospect. The European Patent Office (EPO) is already able to grant the European patent. Current law treats the European patent like a bundle of national patents when it comes to enforcement. Legal action in each relevant national jurisdiction is necessary when the patent is under legal debate.

The new EEUPC would also have jurisdiction not only over the European patent, but over the proposed EU patent, which would provide patent protection throughout Europe. The EU patent would be additional to the European patent, which is for selective rather than total coverage.

Vicki Salmon, a partner at IP Asset, an intellectual property firm based in the UK, and chair of the Chartered Institute of Patent Attorney’s Litigation Committee, believes the EEUPC is wanted by those that need to litigate their patents in more than one jurisdiction.

She says: “The idea that you have to enforce what is essentially the same patent separately in each European jurisdiction, as opposed to just once, as in the US, doesn’t make commercial sense. One of the barriers to innovation is the cost of obtaining and enforcing patents. If this can be reduced, then innovation and the protection that people obtain for it, can be improved. A lot of people get priced out of trying to enforce patents because it’s too expensive.”

The cost savings are important to those that need wide protection and wish to enforce a patent in many jurisdictions, but these entities may be in the minority, according to Jochen Pagenberg, a founding partner of Bardehle Pagenberg, a German patent law firm. Pagenberg is president of the European Patent Lawyers Association, a member of the Expert Group of the EU Commission for the EEUPC and has served as an expert on the Working Party for the European Patent Litigation Agreement.

He says: “Small and medium enterprises (SMEs) often file their European patents in fewer than 10 countries. There are not many patent cases involving SMEs that are litigated in more than one or two countries.

"Some practitioners estimate around 5 to 8 percent, so [for this percentage] a court in their own country where they can speak their own language and choose their own attorneys may be a comfortable situation. If a litigation system for the large corporations is being discussed, one should not forget the SMEs and not force them into the same system with the big ones.”

The proposal for the exclusive jurisdiction of a single patent court—not only over future EU patents, but also over existing European patents—could provide an intolerable financial risk for SMEs that was not there before.

Currently, a European patent can either be challenged in a relatively inexpensive opposition proceeding at the EPO or in each of the individual countries for which it has been granted. The EEUPC would make it possible to challenge a European patent’s multiple validities in a single court.

For SMEs that rely on the rights provided by only a few patents, this could put their very livelihoods at risk. “The centralisation of all litigation in one court opens up the possibility of a counterattack as an invalidation request for all designated countries,” says Pagenberg.

“This is a large risk. It could be done with long trials, costly expert opinions, witness hearings and so on. But at the same time, the threat of losing the coverage of all the designated countries in a single litigation could be a reason for an SME to file in national patent offices rather than the EPO. For SMEs, it is a cost and risk question.”

“The idea that you have to enforce what is essentially the same patent separately in each European jurisdiction, as opposed to just once, as in the US, doesn’t make commercial sense. One of the barriers to innovation is the cost of obtaining and enforcing patents. If this can be reduced, then innovation and the protection that people obtain for it, can be improved.”

He says: “I’ve always proposed that European patent filers should have the option of not using the new EEUPC, allowing them to keep their litigation in the national courts that they have always used. This would exclude the possibility of a central attack in one court, because then defendants in an infringement litigation have to go to the EPO with an opposition proceeding and/or could use the national courts, but only one by one. This usually means only the one where the infringement case has been filed.” The unknowns of the EEUPC make it difficult to know what the final litigation system will look like, or what the exact benefits and risks of such a system would be. Benoît Battistelli, president of the EPO, recently commented on the drawbacks of defending a patent in each member state of the EPO.

He said: “[It] costs a lot of money and time, and sometimes there are contradictions in the national judge’s decisions.” It is hoped the EEUPC will combat these issues, but Catriona Hammer, senior IP counsel at GE Healthcare, a company that owns patents in fields such as medical devices, medical software and life sciences, prefers to have a certain system that will meet the specific needs of her business.

She says: “Looking at our patent portfolio as a whole across Europe, it’s very difficult to say what the impact of the EEUPC will be, because there’s still a lot of uncertainty about what it’s going to end up looking like. It’s also uncertain whether it will result in more or less litigation in Europe. What we’re looking for is a high-quality, cost-effective litigation system for Europe. We do not want a poor-quality system to be forced through as a political compromise—we would rather keep the current system.

“Right now our major concern is with the privilege provisions, which are inadequate as currently proposed. For example, it appears that communications between the patent attorney drafting the initial patent application and the inventor may not be privileged when the initial application is prepared outside of Europe. The IP Federation has prepared a good position paper on this topic.”

Shop ‘til you drop

The EEUPC draft agreement makes provisions for a first instance court and a second instance, appellate court. The first instance court, according to the draft agreement, will be split into local and regional divisions, as well as a single central division.

Article 15a of the draft agreement says that actions will usually be brought before the host of a local division or the participant of a regional division where the infringement of a patent occurs, or where the defendant is domiciled. If there is no local or regional division, then actions can be brought before the central division.

A litigation system of this type would allow a choice of where to enforce or challenge a patent. This choice would depend on the aims of the litigation, which could be invalidity, high damages, or a long and costly trial. It is on this last point that ‘forum shopping’ has received unhealthy press.

Pagenberg says: “A form of forum shopping has become known as an ‘Italian torpedo’. A patent infringement action could be blocked and delayed in other EU countries if an action is filed in a ‘slow court country’.”

Although forum shopping can be abused, there are benefits to it that can be good for the litigation system as a whole.

Salmon says: “I think forum shopping is a good idea because I think it will create competition between courts, which can lead to improved court systems. Overall, there is going to be a court of appeal which will look to give consistency between the local, central and regional courts in relation to the interpretation and application of patent law. In order to get a court system that is responsive to its customers, competition between the courts, and therefore the ability to forum shop is, important.”

Supreme intervention

Many court structures have two tiers. One reason for this is to create a harmonised body of law and prevent conflict between decisions of the first instance courts, according to Salmon. “It’s then much easier for lawyers to predict what the outcome will be, which gives you greater certainty,” she says.

She adds: “The EEUPC will only have one tier of appeal and input from the Court of Justice is limited to points referred to it for clarification. The Advocate General was concerned that the draft agreement does not ensure that all principles of EU law are properly applied, and in particular, one principle of EU law is that a defendant is entitled to a trial in a language that he or she understands.

Unless the draft agreement is amended—currently, the central division would hear the case in the language of the patent, not in the language of the defendant—then that would be a principle of EU law that has been breached. According to the Advocate General, for something like that or for a complaint about the handling of an application for an EU patent in the EPO, there should be greater clarity that the EPO and the court will work in accordance with EU law.”

It seems that the Advocate General’s thoughts on EU law and the EEUPC are, to a certain extent, agreeable.

“Yes one must observe EU law,” says Pagenberg. “But this should be done as foreseen in the draft, namely by reference rulings, as it is practised now by the national courts in other fields of law, and this is already enough of a burden on the Court of Justice.”

The court seems to have enough on its shoulders as it is, but there is a worry that the Advocate General’s opinion leaves the door open for an even greater role in the new litigation system.

Pagenberg says: “If the Court of Justice became the third instance in patent proceedings, any further work on the EEUPC could be stopped immediately; representatives in industry and litigators as well as judges would regard this as a ‘deal breaker’.

Experienced judges in the first and second instances of the EEUPC don’t want their carefully drafted decisions examined by judges who have no patent experience and who take two or three years to decide a case. Patent litigation would become so unpredictable that one could as well flip a coin. This is no disrespect towards the judges; it would just be unfair to expect anything else in such a specialised area as patent law.”

Talent contest

As important as the structure of the EEUPC itself are the judges who will sit in and ultimately decide on proceedings. The EEUPC draft agreement proposes that “legally qualified” and “technically qualified” judges will sit in panels of three to two in the regional and local divisions.

Hammer says: “We would prefer to have specialist judges who have dealt with patent litigation before, and understand its complexities. While they don’t need to be technical experts in the precise subject matter themselves, it would help if they had some technical experience in the past and have an aptitude for being educated in a particular technology.”

To ensure that judges of suitable ability and experience sit on EEUPC cases, the draft agreement proposes a training framework for judges that focuses on things such as “internships in national patent courts or divisions of the Court of First Instance hearing a substantial number of patent litigation cases; [and] technical aspects of patent law”.

“A theoretical knowledge of patent law and patent litigation is indispensible,” says Pagenberg. “But patent litigation can only be learned by doing.”

There is an increasing consensus that a European patent litigation system is necessary. Enforcement of the European patent is difficult, but the solutions proposed in the current Draft Agreement for the EEUPC seem to cause more problems than they solve. It is important that the EEUPC is right for its users and customers.

The Court of Justice’s decision on the compatibility of the draft agreement with EU treaties could be to send the draft agreement back to the drawing board. That way, things could get fixed. But if that happens, the overriding worry is that the EEUPC may be disregarded altogether as another bold EU initiative that failed when the going got tough.

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