1 October 2011PatentsRichard Gough

Patent litigation across the border: why expectations should change when home rules don't apply

As an aid to navigating across boundaries, this article provides an overview of some key similarities and differences, referring to aspects of the litigation process in particular countries by way of illustration.

Civil and common law countries

The world is divided into a patchwork of different legal systems, including an important demarcation between civil law countries (such as China and many European states) and common law countries (such as the US and Commonwealth countries).

There is a contrast between the chiefly inquisitorial approach of civil courts, in which the court asks the questions, and the chiefly adversarial approach of common law courts, where the parties do. This produces a natural flow-on effect across procedural and forensic aspects of the court process, from the expertise of judges, the ambit and length of hearings, through discovery, to how witnesses, and particularly experts, are handled, and finally to remedies such as damages.

Specialist patent courts

Many countries, such as Germany, the UK and Taiwan, have established specialist patent courts either as separate courts or as divisions of courts of wider jurisdiction.

For instance, the UK Patents Court is part of the High Court and there is also a Patents County Court. Some courts in China have a specialised IP division. In Japan, some district courts have IP specialist divisions, and IP infringement cases and decisions in patent cases by the Japanese Patent Office may be appealed to the Intellectual Property High Court.

The absence of specialised courts does not determine the level of expertise of judges. In Australia, for example, most patent cases are heard by the Federal Court, and allocated to judges with relevant experience. The Federal Court in Canada also has significant IP expertise.

As all advocates know, there is a fundamental difference in forensic approach depending on whether you are addressing a specialist or nonspecialist judge, or a jury. While across the world juries in patent cases are rare, US district courts that hear patent causes are courts of general jurisdiction and the parties are normally entitled to a jury.

In contrast, the US International Trade Commission frequently hears patent cases using Administrative Law Judges without juries. Patent litigation techniques in the US that focus on a jury are not generally applicable in other countries. Emotional appeals are replaced by a drier, more technical forensic approach.

Early resolution of issues

If some issues can be decided early, the cost and time span of litigation can be reduced significantly; and a preliminary injunction may be sufficient to resolve the issues between the parties without a full trial.

Although available in most countries, courts do not generally issue preliminary injunctions in patent infringement cases. In Canada, China, Japan, Taiwan, the US and the UK, it is particularly challenging to meet the courts’ requirements. For example, in the US the plaintiff must establish a likelihood of success on the merits and irreparable harm.

This may be difficult unless the patent has been litigated previously and the products are demonstrably similar to those already found to infringe. German courts usually issue a preliminary injunction only if the patent is likely to survive an invalidity challenge. In Australia, it was once thought impossible to obtain interlocutory injunctions in patent cases, but a series of pharmaceutical companies have recently been successful against generic competitors seeking early market entry.

Markman hearings are a feature of US patent cases, with decisions on claim construction often leading to settlement or summary judgment. Many US courts do not conduct Markman hearings, however, until after discovery has been taken and significant costs incurred.

Generally, in other countries there is no direct equivalent to a Markman hearing; but experienced IP judges in China are increasingly interested in considering claim construction before infringement, and schedule pre-trial hearings for that purpose. Courts in the UK and Australia have power to consider particular issues as separate questions, although this can be counterproductive in complex litigation where a holistic approach is often critical.

Witnesses

In the US, the inventor is usually called as a witness so that the jury can get a direct sense of the personal value, commitment and effort involved in their contribution. In other countries, where there is no jury to be swayed, there may be a question about exposing the inventor to cross-examination.

Expert witnesses are crucial in most patent cases, but are treated differently in different courts. It is common for their evidence to be provided in an affidavit or written statement, but they are not always cross-examined. For instance, in Japan, the court may not allow such a process. Taiwanese courts commonly rely on expert witnesses for claims construction and infringement analysis, and they present their evidence orally.

In China, an expert may file a written submission; and since judges act in an inquisitorial capacity, it is preferable for the expert to attend court. If not, their credibility may be diminished. Courtdesignated experts also play an important, sometimes decisive, role in China. Courts in Dusseldorf, Germany have developed a special procedure in which a plaintiff can ask for an opinion on the infringement issue to be provided by an independent court-appointed expert.

In Australia, to refine the issues that are truly in question, there is a trend towards ‘hot-tubbing’, in which the expert witnesses of the parties confer and prepare joint reports with differences of opinion highlighted. They may then be required to give their oral evidence in court together.

Discovery

US discovery procedures are notoriously broad-ranging, now including extensive electronic discovery. Although discovery is available in countries such as Canada, the UK and Australia, courts have limited its extent to reduce costs. In China, the patentee has the burden of proof, but may ask the court to order the preservation of certain types of evidence in the hands of other parties.

In Taiwan, requests may be made to the court for preservation of evidence. In Japan, a party may petition the court to order the holder of a document to submit it to the court. Neither Germany nor Taiwan have discovery proceedings.

Damages

There are many approaches to compensation, typically tied to actual losses or profits flowing from infringing acts, and sometimes including a punitive element. Awards are highly dependent on the facts. There is a very wide range of possible financial outcomes, particularly when costs are taken into account. In some countries as a large patent case unfolds costs may become a more important financial consideration than compensatory awards.

At the top end of the scale is the US, where treble damages can be awarded for knowing infringement. Damages can be in the hundreds of millions of dollars, and costs in the tens of millions. A jury in East Texas awarded a patentee over a billion dollars in damages, before being overturned on appeal.

Taiwan has delivered damages as high as $700 million. In China, the courts often award statutory damages of RMB 500,000 ($70,000). They are generally reluctant to grant substantial damages, although there was a recent record award of $47 million.

The publicly available data concerning damages awards can be misleading. For instance, in Germany damages awards are kept confidential. In the UK and Australia the few published awards go up to a few hundred thousand dollars, but in reality they provide poor guidance. This is because issues relating to validity and infringement are often decided before any damages hearing, and most cases settle after liability is determined.

Alternative dispute resolution

Most patent cases settle after direct negotiations or more formal arbitration or mediation processes. These may provide the only practical way to resolve a patent dispute extending over many countries.

There are both judicial and cultural differences of attitude to such processes. For instance, in some jurisdictions like Australia, serious attempts to settle a case are expected, and the Federal Court may order the parties to mediate even if that is contrary to their wishes. In other countries, particularly in Asia, it may be regarded as a sign of weakness or involve loss of face to suggest that the parties should attempt to mediate.

Alternative dispute resolution is available in patent proceedings in Germany, but it has not played a major role. Reflecting a global trend, though, the Munich IP court recently initiated the New Munich Procedure, which includes optional mediation procedures in which an IP judge acts as mediator.

As well as international bodies such as The World Intellectual Property Organization (WIPO), many countries have specialist alternative dispute resolution bodies, such as the Japan Intellectual Property Arbitration Center.

Wrap up

This broad sweep across issues and countries provides a glimpse of some of the important differences that parties and those advising them can expect to confront once a patent dispute jumps borders and home country norms no longer apply.

Richard Gough is a partner in the Sydney office of Baker & McKenzie. He can be contacted at: richard.gough@bakermckenzie.com

Baker & McKenzie partners Stephen Jones (London) and Bill Richardson (Toronto) contributed to this article. They are both leading IP and patent litigation specialists, with over 30 years of experience.

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