Who’s Who Legal brings together Ella Cheong of Ella Cheong Law Office, Liz Cohen of Bristows and Kenneth Adamo of Kirkland & Ellis to discuss issues facing patents lawyers and their clients in the industry today.
Ella Cheong: As more support measures are being provided to SMEs by the government and VCs in Hong Kong, it is expected that SMEs will better understand the importance of the IPRs they possess and better evaluate the IP value with their business partners and financiers, and then adopt appropriate IP management and commercialisation strategies for driving business growth. Since SMEs account for over 98 per cent of business units of Hong Kong, their ability to effectively protect and utilise IP rights for business development will have an important impact for Hong Kong’s economy as well as for all IP practitioners.
Liz Cohen: There is no doubt that in the past decade more and more companies and academic institutions are recognising the value of their intellectual property. Our transactional and corporate practices have reported a noticeable surge in companies and academic institutions seeking our assistance for exploiting their intellectual property by way of licences or sales. The life sciences sector in particular has seen a recent rise in fund raising and IP exploitation for groundbreaking discoveries, such as gene editing and priming patients’ own white blood cells to recognise and kill cancer tumour cells. In the past five years or so, several companies developing such technologies have been incorporated both in Europe and in the US, although fund raising remains stronger in the US. Our firm has assisted a number of such companies and institutions to fund raise and to license their technologies to other organisations or into spin-out companies. On the back of growing recognition amongst companies that their intellectual property rights remain an underused revenue stream, we have noticed more and more companies asking for our assistance for putting in place measures and policies aimed to ensure that any intellectual property generated within the companies is captured and documented appropriately.
Kenneth R Adamo: The effects of the new America Invents Act (AIA) of 2011, the first major revision of the US Patent Act in 60 years, are widespread and deep. One of the most prevalent effects is the new post-grant review proceedings, where an administrative board, the Patent Trial and Appeal Board (PTAB), revisits and reweighs the patentability/validity of an issued US patent. These proceedings have been a phenomenal success in terms of degree of use, cutting into traditional court-based tests of validity. Favoured with a broader claim analysis regimen and a lower burden of proof concerning patentability/validity than that used by US district courts, these proceedings are also targeted for completion within an 18-month period. Success rates for challengers are quite high at the PTAB (86 per cent of trials result in at least some challenged claims being found unpatentable in inter partes review proceedings, which are based on patents and printed publications). Appellate review at the US Court of Appeals for the Federal Circuit has usually (82 per cent) affirmed the PTAB result in full.
Other AIA-based changes include: a redefinition of what constitutes prior art over which an invention must be measured in the application process, US district court enforcement validity proceedings and administrative post-grant review proceedings; and the adoption of a first-inventor-to-file system to replace the traditional first-to-invent system in determining the effective patent application dates, that have substantially changed patent prosecution and validity defences for post-16 March 2013 applications and newly issued patents.
Ella Cheong: Hong Kong is promoting itself as an IP trading hub. In light of this, there are currently discussions in Hong Kong for bringing in an original grant patent (OGP) system. This OGP system will allow standard patent applications to be filed firstly and directly with the Hong Kong Patents Registry. This is in addition to the current system of re-registrations of EU (UK), UK and CN patents.
Liz Cohen: I’m interested by Kenneth R Adamo’s comment on the effect of the new American Invents Act and the changes it has brought to patent practice in the US.
On the other side of the Atlantic, the biggest change in the patent litigation landscape Europe has ever seen will be brought by the new Unified Patent Court (UPC), which is expected to open for business in Q1 2017.
At present the European patent system is a patchwork of jurisdictional rights; although one can make a single application for a patent at the European Patent Office (EPO) in Munich, at the end of that process the patentee gets a bundle of patents with an independent existence, which have to be enforced locally, state by state.
The new system will change that, and it does it in two ways. First, it creates a new species of patent, the European patent with unitary effect – more widely known as the unitary patent. The unitary patent will be granted by the EPO in the same way as “classical” European Patents (EPs). It will be possible to obtain a unitary patent for a large number of EU states as well as “a bundle of EPs” covering non-participating EU states and other EPC states.
Second, it creates a new enforcement system, which goes beyond enforcement of the new unitary patent. The UPC will eventually have jurisdiction over not only the new unitary patents, but also over all existing EPs (in as far as contracting states to the UPC are designated by those patents (as surely all but a very few will be).
Therefore, there is a very big retrospective element in this new system, with about 600,000 existing EPs which will suddenly be capable of being litigated in this new court – unless patent owners opt their EPs out of the new system, something that will be possible during a transitional period of at least seven years. Opted-out patents will continue to be subject to the exclusive jurisdiction of the national courts. A recent development is that opting out will be free.
New EPs granted after the UPC system comes into effect will likewise be subject to the new system – again unless the patentee does something about that – and remember, about 10,000 EPs are granted every week.
Businesses simply cannot afford to delay their own UPC preparations a moment longer. Litigation and opt-out strategy is a very complex matter and will need careful consideration over the coming months.
Ella Cheong: It appears that patent litigation has decreased in the US. A primary reason being the Supreme Court’s decision in Alice Corp v CLS Bank which held the patents to be invalid because the claims were drawn to an abstract idea, and implementing those claims on a computer was not enough to transform the idea into patentable subject matter. This significantly impacted the ability to obtain and assert software patents for patent holders. Regardless, there has been an increase in patent applications worldwide. For example, in China, there is an increase in patent owners who are waking up to the fact that their IP portfolios need to be protected.
Liz Cohen: During the past decade, the life sciences sector has seen the market for biologics grow at a very rapid pace. In 2014, six of the global 10 blockbuster drugs were biologics, and it is widely anticipated that the future of the pharmaceutical industry lies in biologics. This has been paralleled by an increase in the number of patent cases involving biologics before the English and European courts, and some of the challenges faced (or likely to be faced) by manufacturers of biologics, both in terms of validity and enforcement, are new.
Patents for biologics are typically filed early, before data to support the often broad claims contained in them have been produced. This in turn results from the fact that bringing a biologic to the market is extremely expensive and time consuming (much more so than for small molecule products), and a patent (or application) will facilitate investment in the steps required to do this. As a consequence, attacks against the validity of biologic patents have centred on alleged intrinsic flaws in the quality and extent of the disclosure contained in the patent specification, and in particular on the question of whether the information in the patent is sufficient to make the invention “plausible” – a relatively new point in English and European patent law and a hot topic in recent patent cases before the English Court. Perhaps unsurprisingly in light of the mostly early priority dates, questions of novelty and inventive step have been less of a concern.
In addition to validity issues, a different market dynamic for biologics compared to that of small-molecule pharma is likely to have an impact on the enforcement of biologic patents, in particular in relation to the availability of preliminary injunctions. For small-molecule products, a key argument before the English Courts when seeking a preliminary injunction against competitors planning to launch at risk is that there will be a “feeding frenzy” of competition which will result in a dramatic and irreversible price spiral and irreparable harm unless the generic is injuncted. Such negative effect on price may be more difficult to show for biologics, which due to the high investment required to develop a biosimilar are likely to face only few competitors – perhaps as few as one or two. Thus, preliminary injunctions may not be a weapon that can be deployed against biologics as they have been against small molecule pharmaceuticals. Only time will tell.
Kenneth R Adamo: The strong trend of large general practice firms – including those with multi-jurisdictional office locations, lawyers and practice reach – to acquire or grow an intellectual property department with substantial patent law capability continues. As economies which invest in the research and development work that leads to patentable inventions expand, the need for protection of that investment and the monetisation of patented technologies to profit from those expenditures increases rapidly. The corporations and other business entities that already comprise the majority of general practice firm clientele want at least full licensing (inbound and outbound), as well as full administrative patent enforcement and local legal system enforcement capabilities, offensively and defensively. These needs have tended to shift patent practice development towards acquisition of trained-up, existing patent litigators/solicitors and trial lawyers/barristers, over those that are home-grown, at least for rapid acquisition of capability. Home-grown works as well, but is more time-consuming and presents “chicken/egg” problems (experienced trial lawyers/barristers are needed to teach the new, younger lawyers, which requires an acquisition to start the process).
Interestingly, conflict of interest problems – an issue most applicable to US-based large general practice firms – sometimes lead to strong individuals and entire patent practices being acquisition-ripe if a new platform avoids major client conflicts present in an originating firm.
Liz Cohen: In addition to the need for firms to expand their patent practices in view of growing investment in R&D sector (as described by Kenneth R Adamo), there is also a need for patent practices around the world – whether national or international – to be ready to advise on the Unified Patent Court (UPC) in light of the current estimated opening date for business for the UPC of Q1 2017, in order to remain competitive in what will be a completely new litigation landscape.
The central division of the UPC will be located in three cities: London, dealing with pharma and chemical cases; Munich, dealing with mechanical cases; and Paris, dealing with the rest – mainly telecoms cases (with a current estimated distribution of the business of 40 per cent, 10 per cent and 50 per cent respectively). To be competitive, independent and international practices will thus need to be ready and prepared to represent clients in at least all three forums, in relation to validity and throughout the contracting states to the UPC in relation to infringement.
When the UPC court opens, there will be no precedent case law, and each case will be considered by a panel of judges of mixed European nationality with consequently mixed legal expertise. The law applied is likely to be a mixture of EPC case law, and civil and common law, and the ability to provide mixed European expertise to clients will therefore be key.
Consequently, there has been a real drive in recent years to ensure that patent practices remain competitive in this new landscape. For example, US firms have been seen to acquire or form alliances with European based practices, and patent attorney firms have been seen to take on litigators, and some patent specialists throughout Europe have started to make strategic alliances.
Ella Cheong: The growing demand for a more global practice of patent law has not changed the way we run our patent practice. We provide a full range of IPR services for every country (according to its laws and practices) from the initial identification, prosecution and registration of IP, through to its exploitation, commercialisation and enforcement. However it has been noted that many international and local firms whcih never dealt with IP issues are suddenly developing IP departments within their firms.