european patent litigation strategy

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1 //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// european patent litigation strategy Jonathan Radcliffe, Gillian Sproul (London) and Dr Ulrich Worm (Frankfurt) Mayer Brown

2 Introduction Europe is increasingly important to US and international companies as patent disputes and businesses go global. Companies take great care in patenting the right products and technologies in the right countries, and subsequently in managing and exploiting them. It is equally important to craft a coherent and thoughtful strategy for patent enforcement or challenge on a global scale. This series of articles is a general guide to the principal features of patent litigation in Europe with an emphasis on life sciences. It aims to address the key relevant tactical and strategic issues that should be considered when developing a European patent litigation strategy rather than to provide bespoke answers. This material was written under the shadow of the proposals for a single European patent court. It therefore concentrates on the national litigation strategy route to patent enforcement in Europe, given that until recently the shape and contours of the Unified Patent Court and its precise implementation were surrounded by uncertainty. The introduction of the Unified Patent Court is undoubtedly the most significant change to the European patent landscape since the European Patent Convention of It will have a profound effect on how companies set about their patent strategies from filing through exploitation to enforcement. This is not to say that the national litigation strategy route has been consigned to history. The Unified Patent Court and the Unified Patent are by no means absolutes. The continued existence of the national patent system across Europe and the ability to opt out European patents from the Unified Patent Court system for at least the first 7 years post-commencement mean that the national patent system will still play a vital part in any carefully thought out European patent litigation strategy. Indeed, the existence of two distinct yet parallel systems for enforcing patents in Europe, and the subtle interplays around the ability to opt patents out of and back into the Unified Patent Court system, means that the range of options and strategies has increased exponentially. Jonathan Radcliffe August copyright 2013 by the bureau of national affairs, inc.

3 1. Developing and Managing a European Patent Litigation Strategy By Jonathan Radcliffe, Mayer Brown, London; jradcliffe@mayerbrown.com I. The Importance of a patent litigation Strategy No matter what a business industry or market sector may be, there will be a competitor busy planning to capture market share from it. Companies take great care in patenting the right products and technologies in the right countries, and subsequently in managing and exploiting them. It is equally important to craft a coherent and thoughtful strategy for patent enforcement or challenge on a global scale. European Patent Landscape at a Glance The European patent system is based on the European Patent Convention which, critically, is not a part of the European Union legal system. The EPC currently has 38 contracting states and 2 so-called extension states. European patents can take effect in some or all of these countries, as chosen by the patentee. Europe has both European patents and national patents. Once a European patent is granted it takes effect as a series of national patents in all designated countries. The European Patent Office deals with granting European patents and is the venue for post-grant oppositions, but it does not deal with revocation or infringement. Infringement and revocation of both European patents and national patents is dealt in each country under its national law. Court procedures differ depending on the rules of the national court, and different national courts can reach different conclusions in identical but parallel cases. Certain national courts have reputations as being more pro-patentee or more prodefendant. Unlike the US, courts in Europe do not have jury trials, but use judges only. In some countries these are specialist patent judges. Effective patent litigation strategies need to reflect the realities of global competition, irrespective of whether the strategy is essentially defensive, offensive, or a blend of both. As patent disputes and businesses go global, European jurisdictions are increasingly important to US and international companies and in multinational disputes the UK and Germany are often of central importance. There is consequently a growing and more sophisticated appreciation of the differences between the European systems and those elsewhere, but not always a full understanding of how to deploy these to best advantage or conversely to a competitor s disadvantage. The following is a general guide to the principal questions one should consider when developing a strategy for patent litigation in Europe. It emphasises the key relevant tactical and strategic issues that should be addressed rather than providing bespoke answers. A carefully thought out strategy should ideally be planned in advance, but it would be unrealistic to suppose that this is always possible and indeed the unusual nature of an attack may require tearing up a preconceived strategy in any case so these issues are equally applicable to companies having to develop an ad hoc strategy. copyright 2013 by the bureau of national affairs, inc. 3

4 1. Developing and Managing a European Patent Litigation Strategy Patent litigation can move very quickly in certain European countries, so being unprepared or slow to react can have potentially devastating results. II. Developing a Winning Strategy A. Know Own Commercial Goals Patent litigation is a means to an end. One of the most common mistakes is a failure to define the desired outcomes to be achieved from the litigation. This is followed closely by a failure to reappraise those objectives in the light of the contours of the litigation as it unfolds few plans survive first contact with the opponent. Articulating commercial goals is vital. This will determine where to litigate, what remedies the litigation should seek, timing, who to sue, and the like. A patentee s primary objectives will differ depending on the scale of its commercial presence and the importance of the product. In markets where the patentee has a commercial presence (themselves or via a licensee), the emphasis will be stopping a competitor from entering or stopping them gaining market share with modified products/processes that incorporate the patented technology. If the threat is to a critical part of the business, the emphasis will be on securing an injunction, and monetary damages will be secondary. In markets where the invention is exploited through licensing, then the strategy needs to consider the licensee s position and who exactly has suffered damage, any applicable indemnities in the licence agreement, and the impact that may have on settlement negotiations. In markets where the patentee has no presence the emphasis may be on encouraging the competitor to take a licence. Articulating a defendant s primary objectives will depend on factors such as the commercial importance of the accused product/process (and whether it is worth fighting through to trial often a key factor in life sciences disputes), and how easily a design around can be made to the accused product/process that neutralises the attack. Will a sustained and sophisticated attack on the patents create a favourable climate for settlement? Should a reasonable royalty be paid and a licence taken? Or is it simpler just to exit a market where the costs of litigation outweigh the commercial return being generated? B. Where to Sue? Choosing the European countries in which to sue is one of the most important decisions in any strategy. This is especially so where as in most global disputes a business will have equivalent patents in most major countries and will be facing concurrent commercial attacks in multiple countries at once. The relative advantages and disadvantages of different countries will be heavily influenced by their specific rules and procedures, relative speed (including the ability to slow down or accelerate the process, as required), availability of specialist patent courts and knowledge of the technology, and the benefits and drawbacks of bifurcation. The following points will be of critical importance. (i) Pre-Litigation Discovery/Document Disclosure and Evidence Gathering Inspecting a defendant s premises or documents can sometimes be critical in determining whether they are actually infringing or not. Not all European countries have discovery/document disclosure rules. If obtaining discovery is important to the litigation then the broad discovery/disclosure rules of the UK and the US courts (including the ITC) must play a key part. In contrast, in Germany for example, as in most of Europe, discovery/disclosure is not generally available. 4 copyright 2013 by the bureau of national affairs, inc.

5 European Patent Litigation Strategy Some countries have broad and powerful pre-litigation search and seizure rules, coupled with evidence preservation. This notably includes France with its saisie contfaçon rules whereby court bailiffs and experts can be requested to seize evidence (both articles and documents) before any litigation, although the saisie will be invalidated if no litigation subsequently commences. The UK has perhaps the broadest and strongest range of search and seizure powers, and has been at the forefront of developing these in the common law world. Key considerations: Can the results from such procedures be deployed to other countries or are they local only? Does one subsequently have to sue if these procedures are used? Is posting some kind of bond or guarantee or undertaking to the local court to compensate the defendant for any damage they may suffer a requirement? (ii) Interim (Pre-Trial) Injunctions This can often be an important component in achieving your commercial objectives. Most European countries will injunct defendants until trial if appropriate, but there are widely varying differences in national practices. Thus interim injunctions in France normally take 5 6 weeks to resolve (without notice injunctions are only in exceptional cases), Germany will take a few days to several months depending on the case s complexity, the Netherlands will grant immediate relief without notice, as will the UK (depending on complexity). Key considerations: Does the country permit without notice emergency applications? How quick is the process? Does the country consider that damages (assessed as a reasonable royalty) are an adequate remedy in patent cases and therefore rarely consider that there can be irreparable harm? How damaging is any delay in asking for an injunction? How high is the evidential threshold? Can one use material from such injunctions elsewhere? Again, is posting some kind of bond or guarantee or undertaking to the local court required? (iii) Speed The time to trial, whether it is slow or fast, can vary widely across Europe. Likewise, the ability to slow down or accelerate the process, as required, and the length of any appeals, varies widely. Understanding local timelines is important, as litigants need to be alert to which countries are likely to issue decisions first, what those outcomes will be, and what consequences those outcomes will have on the litigation elsewhere. Additionally, there is a need to be aware that sometimes litigation can be dramatically slowed down. Many countries in Europe will normally freeze national litigation pending resolution of any European Patent Office post-grant opposition. The Median time to trial and appeal France Germany infringement Germany validity Netherlands UK UK expedited Time to trial Time to appeal 6 months 18 months 30 months 42 months 54 months 1 year 2 years 3 years 4 years 5 years copyright 2013 by the bureau of national affairs, inc. 5

6 1. Developing and Managing a European Patent Litigation Strategy main exceptions jurisdictions that treat this as a matter purely for the court s discretion are the UK, Ireland and the Netherlands. Typical times to trial and then to appeal in the main European countries are: France months for each stage; Germany. Infringement proceedings months and up to 18 months respectively; validity proceedings months and 2 4 years; Netherlands. About 1 year for each stage; and United Kingdom months and 10 months respectively (in cases of urgency the entire litigation through appeal can be as short as 8 months). (iv) Document Discovery/Disclosure Forcing a competitor intent on capturing one s market share to disclose all relevant documents evidencing their infringing activities can be critically significant in a global dispute, especially if those documents can then be deployed in other countries in particular those that do not have discovery/disclosure rules. However, many European countries have no discovery/disclosure rules, particularly civil law countries. Excluding the pre-litigation search and seizure rules mentioned above, there is generally no discovery/disclosure requirement in France, Germany, and the Netherlands. In these countries parties generally only disclose documents on which they intend to rely. So unless a claimant s infringement case is well-supported before commencing the litigation, they will not have the opportunity to obtain and use their competitor s documents during the case. In contrast, as with the US, the UK and Ireland have relatively wide-ranging discovery/disclosure rules. It should not be forgotten that the mandatory obligation to produce relevant documents to the opposing side (and potentially making them public), irrespective of their helpfulness or otherwise, can have advantages and disadvantages depending on the particular context. Reviewing and complying with discovery/disclosure rules will add to the overall expense of the litigation, although may in practice be the only way to force such documents from an opponent. As major patent disputes are normally between commercial competitors, an often vital aspect in the discovery/disclosure process is whether sensitive documents can be kept confidential. Most European countries have mechanisms to deal with this for example there are specific court rules and practices in the UK to preserve the confidentiality of such documents and if needed to limit their dissemination within the personnel of each competitor (the so-called confidentiality club ). (v) Evidence Different courts across Europe require different types of evidence. Mapping out what will be required by each, and how best to prove a case at a pan-european level, is vital. Most European countries place a heavy emphasis on expert evidence, making expert selection and evidence a key part of the litigation. However, there is a wide divergence in practice in how expert evidence is deployed and permitted. Some countries allow the parties to call their own experts (Germany, Netherlands, UK); others do not, and the court appoints its own expert (France, Italy). The practice is mixed in some in Germany parties have their own experts for trial and beyond, but on appeal it is relatively common for there to be a court-appointed expert. Some countries take expert evidence on paper only (France), others require cross-examination at trial (Ireland, UK). This impacts on expert selection, as some experts can be excellent on paper but incoherent and unpersuasive under hostile questioning. 6 copyright 2013 by the bureau of national affairs, inc.

7 European Patent Litigation Strategy Equivalent considerations apply to evidence of fact, but in general extensive evidence of fact is generally less significant in Europe than, for instance, in the US. Evidence from litigation experiments may be vital if, for example, there is a need to demonstrate infringement or to repeat some prior art to demonstrate lack of novelty. Knowing how courts will approach such evidence must be considered. Thus the UK rules mean that such experiments must be repeated in front of the other side, and so must therefore be robust, well-designed and scalable. (vi) Local Patent and Technical Knowledge, Procedural Idiosyncrasies Not all countries have the same expertise and familiarity with patent law, nor do they have the same technical capabilities and expertise. This can impact on strategic choices as to venue, where to seek interim injunctions, which country to choose as lead jurisdiction (will its decisions have precedent/persuasive value and technical weight elsewhere in Europe?) and the like. The main European countries all have specialist intellectual property courts, but may not have specialist patent judges. Specialist patent judges are only found in the UK and the Netherlands, and recently in Italy; Germany only has specialist judges in validity proceedings, but not in infringement proceedings. It is important to understand national appeal systems. Which countries have automatic rights of appeal and which require permission, and on what grounds? How long will an appeal take practices differ widely (appeal in a UK expedited case can take 2 months to judgment, whereas an appeal in German validity proceedings can take between 2 4 years)? Is it possible to suspend any sanctions imposed by the trial court during the pendency of an appeal? Understanding the legal costs exposure is vital in budgeting for the litigation. Although European Enforcement Directive 2004/48/EC established the concept across Europe of recovering reasonable legal costs from the unsuccessful party, in practice different countries have different concepts of what is meant by reasonable. Patent litigation normally involves the two key issues of validity and infringement. Most countries deal with these together, and this results in strategically important and subtle interplays around the inherent tension between the breadth claimed for the patent and the effect that has on validity (so-called squeeze arguments). Considerations for Deciding Where to Sue in Europe In which countries are infringements happening? Do national rules allow the foreign manufacturer to be sued even if not selling/ importing there, or can only the manufacturer s distributors be sued? Can the claimant as patentee sue in that country if they have no direct business there, or must their local associated company or licensee bring the litigation as the only entity who has suffered damage? What is the likelihood of obtaining a positive result? Which countries have the most favourable procedures applicable to one s particular commercial/legal position? What precedent/persuasive authority value will a decision of a particular country s court have? What are the relative speeds of trial, entitlement to appeal, and speeds of appeal? Where might one s opponent counterclaim for revocation of the disputed patent? copyright 2013 by the bureau of national affairs, inc. 7

8 1. Developing and Managing a European Patent Litigation Strategy Austria and Germany are the exception, and bifurcate these issues into separate proceedings. Importantly, this means that a party can adopt different claim constructions in each set of proceedings, so squeeze arguments cannot be run. The bifurcation approach can also mean that findings of the speedier infringement court can subsequently be nullified by the much slower validity court one party may be injuncted only for the patent to be revoked some years later. III. Managing a Winning Patent Litigation Strategy Most large and sophisticated global companies have specialist in-house counsel who will take central responsibility for managing patent litigation. They will normally identify the key relevant patents, form an initial view on validity and infringement, assess the commercial landscape for that product, and often identify relevant witnesses and documents. Modern multinational litigation can move at a very fast pace, and companies cannot afford to allow their competitors to keep them off balance. Yet even the best in-house teams rarely have the resources or the time to handle all the work involved in global or pan-european litigation themselves, and so must engage external counsel. The following points will be of critical importance. A. Lead External Counsel Day-to-day management of pan-european patent litigation is a full time occupation, so it is common to engage an external law firm to act as primary external counsel reporting direct to the in-house counsel and managing the law firms in various countries involved. It is not essential for there to be litigation in that firm s country, although that is often the case. Acting as lead counsel does, however, require a proper understanding of the European landscape, and the chosen firm must have the resource available to staff up the inevitable peaks of work, manage a potentially large electronic document management system, operate a secure intranet, and be able to support the local national litigation teams. Although it is desirable for lead counsel to have offices in multiple countries, it is not strictly necessary, but such large international firms will usually have the resource necessary to manage pan-european patent litigation particularly if there is US discovery to digest and disseminate. B. Team Communication A carefully planned strategy can be easily undone if it is not consistently implemented in a way that allows the litigant to dictate the time, place, and scale of their intended actions any inconsistent arguments or steps in one country may undermine the whole strategy. The responsibility for communicating this strategy should be that of the lead in-house lawyer or lead external counsel. Procedures must be put in place to ensure that: The strategy is kept constantly under review; The clients and the wider litigation team know what is happening; Key issues do not get lost in the detail; A proper record is kept (as clients and lawyers can often change during a big case s lifetime). C. Settlement It is common for potential settlement of major patent litigation to be broached at some point. Whether settlement of major life sciences litigation is possible will depend on whether this is a fight against a generic or a rival originator, how close expiry of the patent/spc is, whether crosslicensing is a feasible option, and what a business commercial objectives for the litigation are. 8 copyright 2013 by the bureau of national affairs, inc.

9 European Patent Litigation Strategy A litigant should consider having dedicated settlement counsel as an essential component of a litigation team. By not being enveloped in the detail they can focus on achieving the overarching strategic goals. In the life sciences arena such settlement counsel will also need to consider whether there are any antitrust/regulatory consequences flowing from potential settlement terms. National and international regulators are increasingly scrutinising life sciences settlements very closely, so it is imperative that antitrust/regulatory advice is fed into settlement discussions in a way that a workable settlement can be achieved that will not subsequently be declared anticompetitive. Managing Pan-European Patent Litigation Make it easy to have call-ins. Webinars and video conferencing (including individual webcams) help even further, especially if documents under discussion are displayed. Ensure that there are regular all-team meetings, and that the key team leaders/members visit the relevant locations. Set up a dedicated intranet to house know-how, key documents, online reporting tools, and the like. Continually share key developments and lessons learned from the litigation. Consider drafting a case manual on the history and background of the litigation, and a technical primer describing the technology and the patent issues. Consider putting in place a common set of standards addressing reporting, case management etc. Ensure that there is centralised and regular reporting by the team (even if a nil report). This is as applicable to countries with slow litigation timetables as to fast ones, and to countries whose professional norm is only to report as and when there is something to say. Be prepared to nurture centres of excellence, and permit certain aspects of the case to be dealt with by dedicated parts of the team. Consider establishing a discovery/document disclosure team (especially if there is US/ UK litigation), so that key documents can be identified, analysed and to the extent permitted distributed. Consider establishing a dedicated settlement team, depending on the weight of the case. copyright 2013 by the bureau of national affairs, inc. 9

10 2. Key Features of the Primary European Patent Litigation Countries By Jonathan Radcliffe (London) and Ulrich Worm (Frankfurt), Mayer Brown; I. The European Conundrum Europe is increasingly important to US and international companies as patent disputes and businesses go global. It is a common but easily made fallacy to assume that the European patent system is largely unified. After all, the European Patent Office is the common unitary pan-european patent office, the European Patent Convention harmonises patentability laws across Europe, there is an EU Community Patent Convention intended to harmonise patent infringement law across the EU (influential, even though not fully ratified), there are EU Directives governing pan-eu laws on biotechnology patents and supplementary protection certificates (patent term extensions), and recently there have been steps to establish a pan-eu unitary patent. Also afoot are plans for a future single European patent court. Yet this degree of harmonisation stops when it comes to patent enforcement. Patent enforcement can only be done in national courts, country by country, irrespective of whether the patent is an EP or a national one. It is trite, but nonetheless true, that infringing activity is no respecter of national boundaries. This is especially so when faced with a determined and concerted attack by a competitor against one s market share across Europe. Patentees must therefore enforce their patents across Europe through a carefully thought out litigation strategy crafted to achieve their commercial objectives. In such disputes the United Kingdom and Germany are often of central importance, and the bulk of high-stakes patent litigation in Europe takes place in those countries. However, if faced with a competitor launching a systemic attack across Europe then in particular France, the Netherlands, and Italy will also be part of the litigation landscape. Understanding how to leverage the contours of the European patent litigation landscape to best advantage or to a competitor s disadvantage is key to winning such battles. The following is a general guide to the principal features of the main litigation jurisdictions in Europe. It emphasises the key relevant tactical and strategic issues that should be addressed rather than providing bespoke answers. II. Where is a Win Most Likely? Choosing where in Europe to sue is one of the most important decisions in any strategy. Patentees will normally have a mix of European patents and national patents in most major countries which can be deployed to deal with a competitor s simultaneous commercial attacks across multiple European countries. Infringing activity is no respecter of national boundaries, but national boundaries may end up imposing different choices on patentees against their will. Usually the patentee can dictate the choice of battlefield by being able to control where to sue and the timing of litigation. This is not always the case in life sciences disputes. Generics will often trigger pan-european disputes by launching litigation aiming to revoke relevant patents and/or to obtain a court declaration that their products do not infringe. Often patentees will receive early warning of a competitor s plans when they file for marketing authorisations (especially under the pan-european centralised 10 copyright 2013 by the bureau of national affairs, inc.

11 European Patent Litigation Strategy procedure). In some countries this step will in itself allow a patentee to launch an infringement action. Equally, litigation cannot be commenced if local national rules do not permit it. There must after all be an actionable act of infringement by a relevant legal person before there is jurisdiction to sue. Acts of infringement are, broadly, harmonised across Europe; thus for products making, disposing, offering to dispose, using or importing them will be an infringement, as will be using a process or offering it for use. However, some countries are reluctant to allow foreignbased manufacturers to be sued absent evidence that they are responsible for infringement in that country; thus merely making and selling products in Country A to a distributor who then imports them to Country B will not normally be enough for that manufacturer to be sued in Country B. The following points are of key importance. A. Specialist Courts Patentees should normally opt to sue in a county that has both specialist patent courts and specialist patent judges. Unlike the US, juries do not play any part in patent cases anywhere in Europe cases are tried by judges alone (sometimes with the assistance of technical assessors). The availability of specialist forums and specialist judges heightens the importance of choosing the right jurisdiction, as specialist judges will usually be significantly better and more experienced at dealing with complex, technology-heavy cases. Often too, these specialist judges will have technical backgrounds and substantial patent experience. The main European patent litigation countries all have specialist courts, although for some (Italy and Spain) this has been a recent development. This can be deceptive, in that not all are staffed by specialist judges. United Kingdom. Specialist courts and specialist judges. France. Specialist courts but no specialist judges. Germany. Specialist courts and judges for both infringement and validity cases. Italy. Specialist courts but no specialist judges. Netherlands. Specialist courts and specialist judges. B. Litigation Timescale The speed of patent litigation varies widely across Europe. The UK, Germany and the Netherlands are usually the fastest, typically taking 9 12 months in the UK, 9 18 months for German infringement cases (depending on the particular District Court), and about a year in the Netherlands (see table below for more detail). However, it is not just the time to trial that is important. In some countries the appeal process takes far longer than the trial process and should not therefore be overlooked, especially when in many countries appeals are almost automatically permitted. Thus an appeal in the UK can take 9 12 months, France months, 1 2 years in Italy, and German appeals can take about 1 year in infringement and 2 4 years in validity cases. The UK has a rocket docket procedure that can be invoked for urgent cases. One of the authors has taken a fully-fledged life sciences case through trial and appeal in 8 months thought to be a record by the Court of Appeal. C. Likelihood of Winning Sophisticated patentees will weigh the relative advantages and disadvantages of different countries with one main objective in mind, deciding which country (sometimes two at most) should be copyright 2013 by the bureau of national affairs, inc. 11

12 2. Key Features of the Primary European Patent Litigation Countries the lead jurisdiction for a pan-european dispute. The ultimate objective is not just to win, but to win well, with a carefully reasoned and thorough judgment that analyses both side s evidence forensically. Such a judgment from the right court can be deployed across the courts in Europe as persuasive authority, as well as being deployed to help engineer a favourable pan-european settlement. Levels of legal costs will of course be important to most litigants. Each case will of course depend on its facts, but nonetheless some general observations can be made. (i) United Kingdom The sophisticated array of tools available in UK litigation means that patents can be subjected to an almost unparalleled forensic scrutiny. The English courts have little hesitation in striking down potentially weak cases that fail to survive judicial scrutiny. The UK has long ago shed its former reputation as a difficult country for patentees. Potential infringers will be given short shrift if they have weak cases on validity (especially if this is being run as the main defence to infringement) or potential weaknesses on infringement (for example in life science cases being too literal in seeking to avoid a claim by using alternative salts to those claimed without a firm basis in the common general knowledge, or being too literal in the design of a claimed design-around product). The English courts have not been as deferential to the infallibility of patent offices as many other courts in Europe, and have not automatically assumed that patents must be valid if they have been granted. The courts regularly revoke patents with a potential weakness (for example, over-broad claims and the existence of close prior art, and dosage claims and formulations in life sciences cases). Potential infringers often therefore look to start revocation or non-infringement cases in the UK especially given the advantages this confers in a race to seize primacy of jurisdiction but it comes at a risk if their case is not legally the strongest. UK and German judgments set perhaps Europe s highest standards of forensic analysis of both side s arguments and evidence, and are carefully reasoned and thorough. They will often prove highly persuasive in parallel cases in Europe and at the EPO. A UK judgment can be a major attraction for litigants because the judgment will be based on evidence and arguments derived from full document discovery, and because the expert and witness testimony will have been tested by full cross-examination on oath at trial. Coupled to this is that save for confidential information any evidence obtained from the opponent in UK litigation can be deployed in other countries and in EPO opposition proceedings once it has been used in court or read by the judge. Often this kind of evidence is analysed in the judgment. (ii) Germany One of the main distinguishing features of German patent litigation is the so-called dualistic system leading to a bifurcation of validity and infringement proceedings in different courts. This generally favours the patentee (adding to the reputation of German courts as pro-patentee), as this procedure makes it easier to advance quite separate arguments on validity and infringement, and to advance different claim interpretations in each case (broad on infringement and narrow on validity). The dualistic system speeds up infringement litigation and helps patentees obtain speedy infringement decisions while keeping legal costs down. Running different claim interpretations would not be permitted in countries such as the UK and the Netherlands where both issues are tried together, and where infringers will consequently try to mount squeeze arguments designed to force the patentee to elect between a broad claim interpretation to catch the infringement at the risk of weakening the patent by allowing in wider prior art than otherwise, and vice versa. 12 copyright 2013 by the bureau of national affairs, inc.

13 European Patent Litigation Strategy Another significant consequence of the German bifurcated system is the relative speed of the two sets of proceedings. Infringement cases are far faster than validity cases, with the result that an injunction may be in place for several years before an appeal in the validity case finally rules the patent invalid. This position of strength can have profound consequences for settlement discussions. German and UK judgments set perhaps Europe s highest standards of forensic analysis of both side s arguments and evidence, and are carefully reasoned and thorough. They will often prove highly persuasive in parallel cases in Europe and at the EPO. The German patent courts are the busiest in Europe. III. UK and German Litigation Compared A. Pre-Litigation and Litigation Discovery / Document Disclosure and Evidence Gathering Inspecting a defendant s products, processes, premises or documents can sometimes be critical in determining whether they are actually infringing or not, and in examining the development work leading up to the invention. Forcing a competitor to disclose all relevant documents evidencing their infringing activities can be critically significant in a global dispute, especially if those documents can then be deployed in other countries in particular those that do not have discovery/disclosure rules. Not all European countries have discovery/document disclosure rules. If obtaining document discovery is important to the litigation then the broad discovery/disclosure rules of the UK must play a key part. By contrast, in Germany, as in most of Europe, discovery/disclosure is not a standard element of litigation. This prejudices claimants who do not have sufficient proof of infringement before starting litigation, but helps those who do have such evidence keep down litigation costs. (i) Pre-Litigation Steps The UK has perhaps the broadest and strongest range of injunctive search and seizure and evidence gathering powers in Europe, including pre-litigation document discovery. The UK has been at the forefront of developing these in the common law world. The position in Germany is somewhat different. There is no pre-litigation document disclosure procedure. However, pre-litigation search order proceedings such as the Düsseldorfer Besichtigungspraxis have recently been codified in the German Patents Act, which permit such steps to be conducted by a court-appointed neutral expert and the patentee s lawyers if there is no other way to prove infringement. The court will then determine how much of the resulting material can be used. Some other European countries have broad and powerful pre-litigation search and seizure rules, coupled with evidence preservation. This notably includes France with its saisie contrefaçon rules whereby court bailiffs and experts can be requested to seize evidence (both articles and documents) before any litigation, although the saisie will be invalidated if no litigation subsequently commences. Italy has a broadly analogous procedure in its descrizione process. (ii) Steps During Litigation Germany has no document discovery/disclosure procedure during litigation other than the preaction search order proceedings mentioned above. Under German procedural law, the court can request parties to produce relevant documents in their possession, but cannot force them to do so apart from indirectly forcing the production of requested documents by drawing inferences from copyright 2013 by the bureau of national affairs, inc. 13

14 2. Key Features of the Primary European Patent Litigation Countries the fact that a requested document has not been produced. Germany s deliberate decision not to force litigants into a general discovery/disclosure helps to streamline infringement proceedings and to keep costs down. However, it has a negative side, in that claimants who do not have full proof of infringement may favour other jurisdictions like the UK where they can use the discovery/disclosure process to make good such defects. The UK has the widest-ranging discovery/disclosure rules in Europe, broadly analogous to those in the US. These form part of the procedural requirements once litigation has commenced. Parties to litigation must not only produce documents on which they seek to rely, but must also produce those which help or damage their own case or that of their opponent. This is a mandatory obligation, although there are patent-specific rules which aim to keep document discovery/ disclosure to manageable proportions (e.g. imposing a time window of 2 years either side of the priority date, and allowing the substitution of a product/process description for discovery/ disclosure on the issue of infringement). Complying with these rules and reviewing the resulting documents will add to the overall expense of the litigation compared to those countries in Europe that have no document production obligations. However, importantly, it may in practice be the only way to force such documents from an opponent, and then deploy them to other countries that do not have document discovery/disclosure. Most civil law-based countries in Europe have no document discovery/disclosure rules (see table below for more detail). B. Interim (Pre-trial) Injunctions This can often be an important component in achieving one s commercial objectives. All the leading European patent jurisdictions will injunct defendants until trial if appropriate (and do so without notice to the defendant in cases of genuine urgency), but there are some important differences in national practices. As mentioned above, the UK has perhaps some of the broadest and strongest range of injunctive powers in Europe. These all have the mandatory requirement that the patentee undertake to the court to compensate the alleged infringer for any damage suffered as a result of the injunction if it is subsequently overturned (e.g. because there is no infringement or the patent is invalidated). These undertakings are rigorously enforced. Damages in life sciences cases can be significant where a competitor has been denied the chance to enter the market in 2011 a GB 17.5 million award has been made in one such case. Germany also has a strong range of injunctive powers, and does not have a requirement to provide any kind of security as a condition of the grant of an injunction. However, in principle the patentee will be strictly liable to compensate the alleged infringer if the patent is subsequently revoked. Despite its bifurcation system, in injunction applications during infringement cases the court will examine the probability that the patent may be held invalid, although this is not a detailed or extensive review. A notable feature of the German process is the availability of the protective brief procedure (the Schutzschrift), whereby a party who anticipates being injuncted files a sealed brief designed to stop an injunction being granted, or at least not without a full hearing, which is only opened as and if the patentee files an injunction application. Of the other countries, the Netherlands cross-border injunction is notable. Although broadranging Dutch cross-border injunctions have been severely curtailed over the past few years, Dutch courts will still grant these injunctions against defendants based outside the Netherlands if their activities are organised by a Dutch-based entity or from a central office based in the Netherlands. However, following the recent European Court of Justice jurisprudence in Roche v. Primus (C-539/03), under the Brussels Convention the injunction has to fall away if the defendants challenge validity in the courts of the relevant non-dutch countries. 1 1 The CJEU has since confirmed the legality of the Dutch approach in another appeal in a cross-border injunction case (Solvay SA v. Honeywell (Case C-616/10)). 14 copyright 2013 by the bureau of national affairs, inc.

15 European Patent Litigation Strategy C. Evidence (i) Expert Evidence Expert evidence is a vital component in European patent litigation. It will generally win or lose the case. Expert selection and evidence is therefore a key part of the litigation. There is a wide divergence in how expert evidence is deployed and permitted. This impacts on expert selection. Some experts are excellent on paper but incoherent and unpersuasive under hostile questioning. There are also national procedural nuances (see the table below for more detail). Germany allows the parties to call their own experts (on appeal in Germany it is relatively common for there to be a court-appointed expert). Expert evidence is given in writing but the court can decide to question the experts at trial. In Germany a neutral court-appointed expert carries more weight than experts instructed by each side, but such court-appointed experts are rare (about 10% of cases, but more in life sciences disputes). The UK allows each side to call its own independent experts, and has detailed rules governing expert testimony. This is given in writing, with reply evidence permitted, but the experts will be cross-examined at trial on their evidence under oath. Once given in open court or read by the judge, such expert evidence can then be used in other countries. In France and Italy the court appoints its own expert (in Italy each side will appoint its own experts to liaise with the court expert). (ii) Factual Evidence Equivalent considerations apply to witness evidence of fact but, broadly, extensive evidence of fact is generally less significant in Europe than in the US. There are for example no European processes analogous to depositions to elicit witness testimony before trial. The UK is notable in having detailed rules governing for witness testimony this is given in writing and as a norm the witness will be cross-examined at trial on it under oath. Once given in open court or read by the judge, such factual evidence can then be used in other countries. The German courts usually rely mostly on documentary evidence. Witnesses can give oral testimony, but this is a matter of discretion for the court the usual position is that the court will rarely consider that necessary if there are relevant documents. (iii) Experiments Evidence from litigation experiments may be vital. It can often in practice be the only way to demonstrate infringement or to demonstrate lack of novelty by repeating a piece of prior art. Experiments are often an important part of UK patent litigation, but the English rules mean that such experiments must be repeated in front of the other side, and so must therefore be robust, well-designed and scalable. Experiments also feature in German patent litigation (although this is comparatively rare), and are normally conducted by one of the parties with an expert reporting on the experiment and its results. IV. European Summary This article has aimed to emphasise the distinguishing features of the main European patent litigation countries. It would be wrong to assume that this means that there is a clear disparity in the quality of justice amongst the main European jurisdictions. There is not. All are world copyright 2013 by the bureau of national affairs, inc. 15

16 2. Key Features of the Primary European Patent Litigation Countries class patent litigation forums on any objective set of criteria, with the UK and Germany perhaps having a particularly pre-eminent reputation. The different nuances of national procedure are in truth opportunities for patentees to exploit when seeking particular strategic or tactical advantage in the context of the particular facts and legal issues of their own disputes. Key headline points are: Speed. The UK, Germany and the Netherlands have fast litigation procedures, with the UK usually the fastest (and its expedited process is even faster). This can be used strategically to overtake litigation that has been commenced elsewhere and secure an advantageous and persuasive judgment for deployment elsewhere in Europe. Sophistication of forum. The English and German courts have an excellent reputation for their expertise and quality (as does the Netherlands). Elsewhere the picture can be different, as the existence of specialist courts does not necessarily confer access to specialist judges. Sophistication of litigation procedure. The UK litigation rules offer a range of highlydeveloped and sophisticated rules enabling full document discovery/disclosure, a rigorous cross-examination of experts and factual witnesses, and the use of experiments in the court process. If these are critical to getting to the heart of dispute, then UK litigation must form a key part of any strategy. Germany s separation of validity and infringement litigation often favours patentees. These split proceedings allow patentees to run slightly different claim interpretations, limit the ability of defendants to run squeeze arguments, and help streamline infringement proceedings and keep down legal costs. Cross-border injunctions. The availability of cross-border injunctions in the Netherlands especially since being upheld in the CJEU appeal 2 can be attractive if a patentee can demonstrate the proper nexus with the Netherlands. Cost. Legal costs for patent litigation vary extensively across Europe. This is primarily a function of how extensive national procedures can be and the value the parties attribute to being able to utilise the particular national litigation tools available in each country. Of the leading European patent litigation countries legal costs in Germany are typically amongst the lowest. Legal costs in England can be amongst the most expensive in Europe, especially for high value complex cases with many witnesses and extensive document discovery/ disclosure, but still less expensive than comparable litigation in the US. An average English case is far closer to the European norm. Key Features of the Primary European Patent Litigation Countries United Kingdom Germany Netherlands France Italy Specialist IP courts/ technical judges Speed of litigation Specialist courts and specialist IP judges months to trial and 10 months for appeal (in urgent cases the entire litigation through appeal can be as short as 8 months). Specialist IP courts for both infringement and validity cases. No specialist judges for infringement cases, only for validity cases. German litigation is bifurcated between infringement and validity. Infringement cases typically take 9 18 months to trial and 1 year or so for appeal. Validity cases take months to trial and between 2 4 years for appeal. Specialist IP courts and specialist IP judges. About 1 year for each stage. Specialist IP courts, but no specialist judges. Typical times to trial and then to appeal are months for each stage. Specialist IP courts but no specialist judges. Between 2 3 years to trial, and then 1 2 years for appeal. 2 Ibid. 16 copyright 2013 by the bureau of national affairs, inc.

17 European Patent Litigation Strategy Key Features of the Primary European Patent Litigation Countries (cont d) Urgent interim injunctions United Kingdom Germany Netherlands France Italy Broad and powerful injunctive and pre-litigation search and seizure rules are available. Interim injunctions can be granted in as little as a few days. In practice there is a reluctance to grant an interim injunction if there is any doubt about whether there is infringement. A full range of injunctions and prelitigation remedies is available. This includes interim cross-border injunctions in appropriate cases. Interim injunctions are available and are normally fully adversarial between the parties (without notice injunctions are only granted in exceptional cases). Broad and powerful prelitigation search and seizure rules by court officials (the saisie contrefaçon). A strong range of injunctions and pre-litigation tools are available. This includes the court-sanctioned description of an allegedly infringing process where that cannot be determined from the product in question (the descrizione). Invalidity claim Yes. Invalidity and infringement are dealt with at the same time. Defendants can defeat an infringement claim with an invalidity defence. A split trial maybe ordered in exceptional cases. No. Germany bifurcates the issues of infringement and validity. In principle no invalidity defence is therefore available on infringement. Yes. Invalidity and infringement are dealt with at the same time. Defendants can defeat an infringement claim with an invalidity defence. A matter of the court s discretion. Yes. Invalidity and infringement are dealt with at the same time. Defendants can defeat an infringement claim with an invalidity defence. Yes. Invalidity and infringement are dealt with at the same time. Defendants can defeat an infringement claim with an invalidity defence. Automatic freezing of national litigation during EPO oppositions No in practice, although in principle a stay can be ordered in the right factual circumstances. Yes, provided the court considers that the prospects of the opposition succeeding is good. Yes. No. Stays are only permitted in relation to proceedings pending before another court of judicial authority; the EPO is considered to be an administrative authority. Discovery/ document disclosure Yes. Broad and powerful document disclosure rules apply, covering internal documents which are both helpful and unhelpful to each side s case. There are patentspecific rules which can be deployed to restrict the scope of this exercise in appropriate cases. No, although prelitigation search order proceedings can secure relevant documents. No, although pre-litigation search order proceedings can secure relevant documents. No. The prelitigation saisie contrefaçon procedure is directed towards seizure of samples/stock and securing a product description, not document seizure. No, although prelitigation search order proceedings (the descrizione) can secure relevant documents. Factual witness testimony and crossexamination Detailed witness evidence is given in writing, and the witness can then be cross-examined under oath at trial. The emphasis is on documentary evidence; oral evidence is rare. The emphasis is on documentary evidence; oral evidence is rare. All evidence is written; no crossexamination. The emphasis is on documentary evidence; oral evidence is rare. copyright 2013 by the bureau of national affairs, inc. 17

18 2. Key Features of the Primary European Patent Litigation Countries Key Features of the Primary European Patent Litigation Countries (cont d) Expert testimony United Kingdom Germany Netherlands France Italy Expert evidence plays a central part. Each side will normally appoint one or more experts. Court appointed experts are rare. Each side can crossexamine the other s experts at trial on oath, and the judge will also usually ask questions. The parties often use experts to support their cases, and experts can be questioned by the court at trial. Court experts are rare for trial proceedings unless the case is technically difficult, but are more common on appeal. Each side will normally appoint one or more experts. Court appointed experts are rare. The court can question experts at trial. The court will often appoint an expert, and the parties can also request this. Little importance is given to an expert report instructed by one side only unless it is extensively corroborated. Expert evidence plays a central part. The court often appoints one or more experts, in which case each side will appoint their own experts to liaise with the court expert. Cross-border injunctions No. Yes in principle, but very rare. Only granted in limited circumstances against Dutch defendants (CJEU has since confirmed that the approach is consistent with EU law). Not granted in practice. Not granted in practice. File wrapper estoppel No. No, but note that bifurcation means that positions adopted in the different sets of proceedings can be based on contradictory claim interpretations. Yes. No. No. Unique national characteristics Powerful and extensive document discovery, speed of process, and importance placed on detailed oral cross-examination and trial. Detailed reasoned judgments from the court. Bifurcation of infringement proceedings and validity proceedings, the lack of a validity defence, and the potential for different claim interpretations. The crossborder injunction, and speed of process. The saisie contrefaçon process. The descrizione search order. 18 copyright 2013 by the bureau of national affairs, inc.

19 3. Current Patent Litigation Trends: UK and Germany By Jonathan Radcliffe (London) and Ulrich Worm (Frankfurt), Mayer Brown; mayerbrown.com; I. Introduction Previously in this series we have emphasised the importance of patentees crafting a carefully thought out pan-european patent litigation strategy designed to achieve their commercial objectives, and the importance of the United Kingdom and Germany (amongst other countries) in any such strategy. Developing such a strategy inevitably involves a sophisticated understanding of the different legal systems in Europe, and how their advantages and disadvantages can be best incorporated into a bespoke strategy optimised for each patentee s particular objectives. Yet it must also involve an appreciation of the differences in the way the law is applied by the different legal systems in Europe. Opportunity may lie in these differences whether it be to one s advantage or detriment. There is undoubtedly a general European trend of convergence in the way countries apply patent law. This has especially been the case with the UK and German courts. There is a high level of communication and cooperation between the judges in both countries when faced with the same disputes, increasing judicial acknowledgment of each other s jurisprudence and the insights offered, and the adoption of common positions on a number of legal issues by the UK and German courts with the Technical Board of Appeal of the European Patent Office. Yet some differences in approach still remain on a number of important patent issues despite this general trend of harmonisation. These can make all the difference between success and failure. This article considers some of the current key patent litigation trends in the UK and Germany. It also sets out in tabular form the overarching approaches taken in both countries to how patents are interpreted, given the importance this can have on the issues of infringement and validity; although broadly harmonised and based on the same basic law, there are nonetheless fine nuances in application between the countries which can lead to different results in practice. II. UK Life Sciences Trends A. Interim Injunctions The ability to obtain an interim injunction against a competitor is one of the most potent weapons in any litigant s armoury. The price the patentee pays for this is the contingent liability should the patent ultimately be held not to infringe or to be invalid to recompense the defendant for any damage it has suffered as a result of the injunction. The English Patents Court has considerably raised the price of this contingent liability by holding in life sciences cases that the patentee s customers can also claim the benefit of this so-called crossundertaking in damages. 3 The underlying rationale is that they are entitled to be compensated if it turns out that they have paid too much for the patentee s drugs during the pendency of the injunction. The practical significance of this is that given that the principal customer in the country is the state, in the form of the National Health Service, then this can act as a significant deterrent to applying for an injunction. The sums involved may potentially be vast. 3 See Wake Forest University Health Sciences v. Smith & Nephew plc [2009] EWHC 45. copyright 2013 by the bureau of national affairs, inc. 19

20 3. Current Patent Litigation Trends: UK and Germany The result is that in practice the courts are granting speedy trials more readily than before, and patentees are more likely to agree to trade off an interim injunction for a speedy trial. Speedy trial in this context means a process typically taking under 9 months from commencement through trial and to judgment. It should also be noted that patentees are now being faced with a trade-off themselves if they are granted an interim injunction they may also have to agree to a speedy trial as well as agree to be potentially at risk should the injunction be set aside. B. Medical Use and Dosage Regimes It is trite law that the first inventor of a new product suitable for use in medical treatment is entitled to patent that product. This can cause difficulties where this is a known product and where the invention lies in the discovery of a new medical use (the so-called first medical use ) or where although already known for medical use the invention lies in the discovery of a new second medical use. Such claims form an important part of the life science industry s patent portfolio. The UK law position used to be that new ways of delivering non-novel drugs for non-novel uses could not be patented because their novelty lay in mere methods of treatment. 4 Fortunately for life sciences companies, the difficulties posed by first and second medical use patents have been addressed over the past few years, with the result that these are in principle no longer objectionable under UK law. First medical use patents have been expressly permitted as the result of a specific enabling amendment to the Patents Act. This now provides that first medical use patents are permitted provided any medical use of the product does not form part of the state of the art, and the use is otherwise inventive. 5 The position on second medical use patents has been resolved by the Court of Appeal decision in Actavis UK Ltd v. Merck & Co Inc. 6 There it was held that new dosage regimes and other methods of administration of a drug are not excluded from patentability as methods of treatment. As a result, second medical uses are therefore permissible even if the novelty relates solely to a dosage regime or a method of drug administration. That said, the English courts approach is nonetheless to examine such cases robustly: If on proper examination the invention is for a mere discovery about an old use which is dressed up as a second medical use, then it will be rejected. Second medical use patents will only be upheld if the active ingredient is actually effective to achieve a new treatment. If it is not, or if it is not discernibly effective, then it is not a proper second medical use, and will be rejected. The Patents Court has recently extended the scope of second medical use patents when considering the interface between second medical use claims and enantiomers. In Ranbaxy (UK) Ltd v. AstraZeneca AB 7 the Patents Court held that a claim to the use of a single enantiomer of an active ingredient (omeprazole) was not infringed by the importation of a medication containing a mixture of two enantiomers, even though the manufacturing process used the single enantiomer as its raw material. Given the importance of medical use patents to the life sciences industry, these developments are to be welcomed. 4 See section 4(2) of the Patents Act 1977 and the Court of Appeal in Bristol Myers Squibb Co v. Baker Norton Pharmaceuticals Inc [2001] RPC 1. 5 See section 4A(3) of the Patents Act 1977 (as amended). 6 Actavis UK Ltd v. Merck & Co Inc [2008] RPC 26, Court of Appeal. 7 Ranbaxy (UK) Ltd v. AstraZeneca AB [2011] EWHC copyright 2013 by the bureau of national affairs, inc.