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4 March 2016PatentsPaul England and Nigel Stoate

Revocation and bifurcation: what you should know about the UPC

The preparatory committee of the Unified Patent Court (UPC) has published location details of its four local divisions in Germany as well as the Munich branch of the central division. One of the German local divisions is also in Munich but will be in a different building from the central division and in a different part of the city. While there is no reason for the local division and the regional division to be physically separate in this way, it is a reminder that these divisions of the UPC have slightly different roles. This is the result of the different jurisdictional rules that apply to infringement and revocation actions.

When lodging revocation claims, the basic rule in the UPC is if no action is already lodged concerning the same parties and the same patent, and unless the parties agree otherwise, the revocation claim must always be lodged at the central division. However, if an infringement action has already been lodged in a local or regional division and it concerns the same patent and the same parties, a different rule applies.

This is that the revocation action must be lodged in the same local or regional division as the infringement action—the infringement action dictates the forum in which the revocation action must be heard. As we explained in our earlier article Keeping it simple: lodging infringement claims in the UPC, this will be the local or regional division in which the infringement occurs or the domicile of the defendant. It could be an advantage to the party enforcing the patent to be able to choose a division more advantageous to it, and the party wishing to revoke the patent has no option but to go along with it.

There are circumstances, however, in which neither of the parties may be able to fully control the division in which the action is finally heard. This is because of article 33(3) of the UPC Agreement. This allows actions to be transferred between divisions of the UPC in certain circumstances. It applies when:

i)  An infringement action relating to the same patent and the same parties as a central revocation action is lodged in a local or regional division; or,

ii)  A revocation counterclaim is lodged against an infringement action that was filed in the local or regional division.

Situation i) arises when the lodging of the infringement action follows the lodging of a revocation action concerning the same parties and the same patent because the party bringing the infringement action has a choice of forum—the revocation action does not dictate the forum of the infringement action. The result is a split forum between the actions, so-called bifurcation. Under article 33(3), the local or regional division concerned now needs to decide whether to bring the actions together or keep them bifurcated.

Situation ii) arises when a revocation counterclaim is lodged against an infringement claim in a local or regional division. It can happen even when a revocation action between the same parties concerning the same patent has already been lodged centrally (in which case, duplication of revocation actions would be avoided by the central division staying the central revocation action). Again, article 33(3) is triggered.

Article 33(3)

There are three possible outcomes that could be decided by the local or regional court under article 33(3):

i) Under article 33(3)(a), the local or regional division proceeds with both the action for infringement and the counterclaim for revocation, and requests the president of the Court of First Instance to allocate from the pool of judges a technically qualified judge with qualifications and experience in the field of technology concerned; or

ii)  Under article 33(3)(b), the local or regional division refers the counterclaim for revocation to the central division and suspends or proceeds with the action for infringement; or

iii) Under article 33(3)(c), the whole case is heard by the central division with the agreement of the parties.

It is only the second possibility that results in the permanent bifurcation of infringement and revocation actions. Why does that matter? The answer is that since the early stages of the UPC’s development, concern has been expressed about a so-called injunction gap resulting from bifurcation. This is when an enforcement procedure is separate to and faster than a revocation procedure.

Judges may also form their own impressions of the bigger tactical picture when deciding whether infringement and revocation should be heard in the same or different divisions.”

The concern is that it allows a claimant to obtain a final injunction before the validity of the patent being enforced is tested. It is viewed as favouring right owners. How do the UPC rules of procedure address this? The answer is that if the article 33(3) decision is made in favour of bifurcation, there are three further possibilities:

i)  If there is a “high likelihood” that the relevant claims of the patent being enforced are invalid, the panel must stay the infringement action until a decision has been made in the revocation action; or

ii) The panel, at its own discretion, can decide to stay the infringement action anyway pending a final decision in the revocation proceedings; or

iii) The judge-rapporteur of the central division must endeavour to accelerate the revocation proceedings and ensure that the oral hearing of the revocation action takes place before the infringement action.

If there is a stay of the infringement action, bifurcation may have the consequence for a patentee—particularly if the patent at issue is perceived to be weak or invalid—that the patent is held invalid at first instance before a decision on infringement. This potential disadvantage to the patentee operates as a balancing risk to any possible injunction gap. The acceleration of proceedings and fixing, where possible, of the revocation hearing before the infringement hearing is intended to prevent an injunction gap entirely.

Judges have their say

What factors will sway the judges of the local or regional division in making the article 33(3) decision? Hearing infringement and validity cases together has the benefit of ensuring that the patent claims at issue are construed consistently for both revocation and infringement actions. It is also the practice of most European courts experienced in patent matters to deal with these actions together. This seems to be why Sir Robin Jacob (formerly a lord justice of the English Court of Appeal) considers it unlikely to happen in most cases. When speaking at the UPC panel discussion at the Fordham IP Conference in 2015 (which Taylor Wessing chaired), he said:

“The only places I do worry that it might happen is in some of the weaker parts of this court—and we have to recognise that there may be local divisions that are not as strong as some other local divisions—who might say ‘oh, it is a bit difficult for us’. But strong judges will not bifurcate.”

Consideration must also be given to general principles of case management. Specifically, in those cases where a revocation counterclaim in a local or regional division follows the lodging of an earlier revocation action in the central division, the panel is required to consider how far the central revocation action has advanced before being stayed. If the case has advanced significantly, maintaining the stay may be difficult to justify.

Judges may also form their own impressions of the bigger tactical picture when deciding whether infringement and revocation should be heard in the same or different divisions. At the Fordham conference, Johannes Karcher (formerly of the Federal Patent Court of Germany) said this about so-called patent trolls:

“If you are in that situation where a patent troll comes along with a shaky patent, which can be seen already at first sight, what would you do if you were UPC patent judges? I think it would be clear that in this case it would be kept together.”

In other words, a case could be kept together to avoid any risk that an injunction can be obtained on a weak patent before validity is determined. Karcher did not mention that a stay of infringement proceedings might also be used, but he also said:

“The other extreme is that the defendant invokes invalidity as a random measure ... You can see that it is only to burn time. Here is the possibility for the UPC to bifurcate in that case and get on quickly with the infringement decision.”

This suggests a spectrum of situations, depending on the precise facts. In the end, it will be for the judges of the UPC to use their skills to determine where on this spectrum a case lies, but in the majority of cases actions can be expected to be heard together. Even if there is bifurcation, there is still the possibility that the infringement action is stayed or that the revocation action is accelerated to be decided first.

The result of the rules is therefore that, while the parties to proceedings may not always be able to presume that an action will finally be heard in the same division in which it was lodged, it is unlikely that they will be troubled by an injunction gap.

Paul England is a senior associate at  Taylor Wessing. He can be contacted at: p.england@taylorwessing.com

Nigel Stoate is a partner at Taylor Wessing. He can be contacted at: nstoate@taylorwessing.com

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