Who’s Who Legal brings together Andrew Shaughnessy of Torys, Jorge Grau of Grau & Angulo, Sabine Agé of Véron & Associés, Will Cook of Marks & Clerk, Charles Gholz of Oblon Spivak McClelland Maier & Neustadt and Pravin Anand of Anand and Anand to discuss industry focus, the trend of non-practising entities bringing cases, and changes to patent law and the legal market in their jurisdictions.
Grau & Angulo
Véron & Associés,
Marks & Clerk
Oblon Spivak McClelland
Maier & Neustadt,
Anand and Anand,
WWL: Which industries have been providing the most work? Do you see any trends occurring?
Andrew M Shaughnessy: The pharmaceutical and biotech industries have been generating the most amount of work, and this is true of patent procurement as well as patent litigation. Due to the high volume of pharmaceutical patent cases, particularly proceedings under the Patented Medicines (Notice of Compliance) Regulations (corresponds to the US Hatch-Waxman regime), there have been more cases resolved in and out of Court. The pharmaceutical cases are a strain on our judicial resources. Canada’s Competition Bureau is closely monitoring the positions taken by the FTC in the US on “pay-for-delay” settlements and has entered consultations on addressing these and other issues in a re-write of the Intellectual Property Enforcement Guidelines, initially published in 1990 during the dot com boom.
The volume of filings and cases are also up in the oil and gas industry, which is not surprising given that Canada is fundamentally a resource-based economy.
In both procurement and litigation, we have seen a lot less activity in the tech and IT sectors than our colleagues in the United States are experiencing. This has to do with the fact that business method patents are not as easy to obtain as in the US, where greater latitude to non-structural claims is given by the USPTO and the courts.
Jorge Grau: First of all, it is worth noting that our firm only works in IP litigation and not in IP prosecution. Therefore any comments here stated only apply to Spanish IP litigation.
Spanish IP litigation is mainly led by the pharmaceutical industry as it is usually the one involving the highest revenue, and considers it to be worth fighting for. But if we look at the rest of the IP litigation conglomerate in Spain, we can also highlight the dominance of the electronic, telecommunications, household and construction sectors among others.
Unfortunately, there are no statistics available showing the “market shares” within Spanish IP litigation.
Sabine Agé: The patents litigated in France are spread over various industries; pharmaceutical industry remains active but other fields such as chemistry and mechanics are well represented. Proceedings relating to telecoms are increasing, though only a limited number went to trial due to settlements.
A number have been brought in the framework of an international litigation with parallel proceedings in one or more European countries (eg, Germany, the Netherlands, and the UK). Main invalidity proceedings were seldom initiated in France, where the nullity of a patent is usually raised as a counterclaim to a patent infringement action; but such invalidity proceedings are now more regularly started, in the area of pharmaceutical products and in other fields.
Will Cook: In the UK, we are seeing high volumes of patent litigation across many technologies, especially within the pharmaceutical, biotechnology, biomedical device, software, consumer electronics, telecommunications and engineering sectors. Of these, there has been particularly high activity in the electronics/telecoms and the pharma/biotech fields: the former driven by NPE activity and FRAND/essential patent disputes and the latter driven by continuing generic challenges and increasing “biosimilar” disputes.
We have seen distinct and sustained movement towards the English courts as a preferred jurisdiction for resolving patent disputes, not least due to:
•the obligation on “infringers” to provide disclosure (or detailed “product descriptions” drafted especially with reference to the patent claims asserted). This is valuable to patentees for proof of infringement;
•the availability of “live” experts to educate the court, particularly to give real perspective on what the relevant industry was thinking at the relevant priority date;
•the availability of highly specialist judges, knowledgeable in both patent law and relevant areas of technology;
•the recovery of costs from the losing party; and
•the absence of jury trial.
All of the above applies to both the English High Court (ie, the Patents Court) where high-value and high-complexity cases are dealt with, as well as, to a lesser extent, the Intellectual Property Enterprise Court (formerly the Patents County Court) which provides an effective and cost-efficient forum for less complex patent cases. This Court has proved to be popular and successful.
Pravin Anand: In post-TRIPS India, due to the significance of the pharmaceutical industry in the Indian economy, large pharmaceutical companies (both foreign and Indian) are becoming more aware of the patent landscape and aggressively asserting their rights through the law courts.
Over the past four to five years, we are noticing a sustained increase in infringement actions being filed by innovator pharmaceuticals against the prolific generics manufacturers. Moreover, the instances of challenges to the validity of granted patents by generics before the Patent Office have simultaneously multiplied.
Over the past year, however, FRAND/essential patent disputes across the telecommunications and electronics sectors have also been on the increase and numerous actions have been agitated in quick succession.
As regards patent prosecution, according to Patent Office statistics the maximum number of patent applications was filed in the life sciences sector, followed by the electrical, mechanical, computer electronics and general engineering sectors.
WWL: There has been a marked increase in the number of patent cases brought by non-practising entities. Has this trend impacted your practice? How can clients address these new challenges?
Charles Gholz: There has indeed been such an increase, and it has had a huge impact on our practice. Congress’s principal response to that increase was the passage of the Leahy-Smith America Invents Act (the AIA). The AIA created a plurality of new administrative proceedings before the Patent Trial and Appeal Board (the PTAB) in which patent claims could be cancelled. The PTAB is an administrative tribunal within the United States Patent and Trademark Office (the PTO) rather than a branch of the federal judiciary. The members of the PTAB are administrative patent judges (APJs). Most significantly, APJs are technically trained lawyers who have devoted their careers to patent law, rather than non-technically trained lawyers with little or no background in patent law – as are most of the judges in the federal judiciary.
Building on our background as a leader in the practice of interference law (a pre-existing administrative proceeding before the APJs in which claims in US patents could be cancelled with retroactive effect), we created a practice group devoted to the new AIA proceedings. That practice group has been a huge success – to the point that we now handle significantly more AIA proceedings than any other law firm.
There are several reasons the new AIA proceedings have proved so popular.
First, they are relatively inexpensive. While no doubt statistics will ultimately become available comparing the total costs of litigating such a proceeding with the total cost of litigating a patent infringement action, my initial guess is that the cost of litigating an AIA proceedings is around a quarter of the cost of litigating a patent infringement action.
Second, they are extraordinarily fast (by judicial standards). The AIA requires that most of them be terminated within a year of initiation, with extensions of up to a year-and-a-half for unusually complex cases.
Third, they are decided by the aforementioned technically trained lawyers who have devoted their careers to patent law. That means that the decisions are more likely to be rational (as judged by patent lawyers) than are the decisions of juries and non-technically trained judges in patent infringement actions. (Of course, clients don’t always want rational decisions. If a client has a weak case, they may prefer to take their chances with a jury or a non-technically trained judge.)
Finally – and this must be said very tentatively in view of the recent of the passage of the AIA – it appears that the APJs are quite hostile to the kind of claims that NPEs typically assert. The PTAB is, after all, a kind of “error-correcting entity” within the PTO, and it seems to have taken on that mission with a vengeance.
All in all, I think that the creation of the new AIA proceedings has been good for our clients. However, I am absolutely sure that the creation of the new AIA proceedings has been good for my law firm!
Andrew Shaughnessy: In Canada, we do not see many non-practising entities. We have one party who has asserted well over 40 patent litigation cases in federal court. But, in the main, NPE litigation is not prevalent. The reasons for this may well be that financial recovery in patent litigation is not as rewarding as in the US and, in Canada, costs follow the event. Given that we are a “loser pays” jurisdiction, launching questionable cases in Canada may be costly. Those who administer court rules are currently considering whether rule changes might be required to require a party bringing suit to “show cause” or declare the actual interest of the party-plaintiff before allowing a suit to proceed. It is early days in all of these initiatives given the dearth of NPE litigation in Canada at the present time.
Jorge Grau: The Spanish and United States jurisdictions (the latter being where the patent trolls practice began) are different. Under Spanish civil procedural law, trial costs are not as high as in the US, thus the defendant is not under such high pressure to settle, as in the US, and is more likely to consider litigating. Furthermore, in Spain, there is a “principle of defeat” which can raise the litigation costs. This principle obliges the losing party to pay the trial costs (its own and the opposing party ones) in the event that all its petitions are rejected. These trial costs include trial fees, lawyer fees, court liaison fees, expert fees, etc. But there is a limit on the amount the losing party has to pay; the amount paid for the aforementioned fees (excluding those subject to a predetermined tariff, as court liaison fees are), mustn´t exceed a third of the value of the object under discussion in the proceedings. In the event that the party acts in bad faith, this limit will not apply.
In some cases, under Spanish Law, patent trolls could be considered as acts of bad faith, thus risking paying all costs, not only their own that were to be assumed beforehand as an investment, but also the opposing party ones, which can be really high in patent cases. Hence, non-practising entities when suing for patent infringement risk not only getting nothing out of it but also losing their investment and having to pay the opposing party’s costs. And if the defendant wins, he will recoup the vast majority of his litigation costs if not all of them.
In Spain the creation of non-practising entities holding the so-called “patent trolls” has not taken root yet, so its impact is irrelevant at the moment. Despite this, as the IP practice usually has an international effect, we have been involved in some United States cases dealing with this issue and they usually end up out of court by means of settlement agreements. Nevertheless, we are now defending a case within the telecommunication sector where the plaintiff is a non-practising entity and we intend to defend it until the very end (it should be mentioned that neither of the parties is Spanish).
Sabine Agé: The French legal system is not a breeding ground for litigation by non-practising entities. The cost of patent infringement proceedings is several times lower than that of a US proceeding and the damages to be granted are also more limited, mainly because they are calculated for a smaller market. The uncertainty arising from the use of juries to decide on patent cases is avoided with professional judges seating (in first instance and in appeal) in four panels of the Paris Court of First Instance and two panels of the Paris Court of Appeal dedicated to intellectual property matters.
Contrary to Germany, where the bifurcation system favours the patent owner by avoiding a thorough review of the validity of the patent before the infringement is decided, French judges decide in the same proceeding on validity and infringement before granting an injunction. Without the leverage of high litigation costs and damages and a patent held valid and infringed in 37 per cent of cases, France has so far not been a forum of choice for non-practising entities.
Will Cook: Given the nature and scope of patent portfolios held by non-practising entities (NPEs), the litigation involving NPEs is generally multi-jurisdictional, and often involves multiple patents in a given jurisdiction. In the UK, we have seen a significant rise in cases brought by NPEs. Successful firms need both resources and skillsets to deal with this: a large and dedicated team of individuals with appropriate technical and legal skills to handle the burden (or opportunity) of litigation against (or for) NPEs.
Firms also need to know both the current and historical approaches to FRAND licensing, essentiality declarations and dealing with SSOs, as well as knowledge and liability of suppliers and potential “exhaustion of rights” arguments. Assessment, outside the litigation, of indemnities and cross-licensing opportunities is also important. In order to provide adequate support to clients and to deal with the complexity of many of the NPE cases, the better firms have hired associates with technical degrees in electronics, physics and engineering (first and PhD) for many years.
In addition, it is particularly important for cases to be managed effectively and efficiently in order to keep costs under control. Clients need to have a strategic and structured approach in place both before and/or after litigation has commenced, including:
•undertaking patent landscaping analysis at an early stage of product development to identify threats (potential patents/patent applications that are likely to be infringed) and opportunities (non-infringing way of implementing a particular solution);
•exploring licensing avenues by considering approaches to patent pools or NPEs: often, the first mover has the strongest position;
•assessing the strength of patent portfolio both for validity and infringement purposes before litigation, perhaps in order to pre-empt with a claim for infringement proceedings or revocation; and
•identifying relevant technical people (both in-house and external experts) at an early stage to act as experts.
Pravin Anand: The trend of patent cases brought by non-practising entities has begun recently. The actions in India have mostly been brought against unwilling licensees who allegedly use proprietary technology without negotiating a licence with the patentee. This trend has had a limited impact on the practice so far but we anticipate that this will become a large field of our practice in the future.
Furthermore, the concept of FRAND licensing and litigation has recently caught the attention of numerous industry sectors, particularly telecoms. As a result, this sector has begun a series of FRAND-related litigations. This, in turn, has led to unwilling licensees filing complaints before the Competition Commission in their FRAND disputes.
Clients would be well advised to understand potential licensing opportunities and requirements simultaneous to their product development process. Knowledge of standard-setting organisations and industry-specific patent pool must increase so that FRAND negotiations between rights holders and potential licensees start early. It is also important to acquire staff with sufficient technical capabilities to determine aspects of validity, and an ability to show infringement prior to initiation of infringement actions.
WWL: Have there been, or are you expecting, any changes to patent law or practice in your jurisdiction? What challenges and opportunities have these presented? How has your firm responded?
Andrew Shaughnessy: In October 2013, Canada’s federal government announced a trade agreement with the EU, expected to result in changes to Canada’s intellectual property laws. These are expected to include patent term restoration of an additional two years and certain appeal rights in cases under Patented Medicines (Notice of Compliance) Regulations. There has been some talk of a move to end “dual litigation” (in Canada, a patent subject to patented medicines (notice of compliance) proceedings is often re-litigated in a full-blown action). The text of the agreement has not yet been released and given that the “devil is in the details” it is too early to comment on the full extent of the amendments. Given the various vocal interest groups, we expect to see areas of controversy.
Our law regarding utility continues to be an issue. In recent years, Canadian patents have been invalidated for failing to meet the utility requirement, which requires inventions to be proven or predicted to work prior to the Canadian filing date. Utility also has unique disclosure requirements which are particularly challenging because the patent document is typically prepared and filed internationally before it is filed in Canada. A disclosure that is sufficient elsewhere can be held to be insufficient here. This requirement has been used to invalidate valuable patents and is therefore a major concern to patent-holders.
We saw a bit of a retreat in the law, in 2013, with the patent pendulum swinging back in favour of patentees following a Federal Court of Appeal decision that appeared to provide some clarity in the utility area. The Supreme Court of Canada has agreed to hear this case in November 2014. With a decision expected in 2015, many are hoping that the Supreme Court will set out principles that provide for greater clarity and predictability.
Jorge Grau: In Spain there are two patent systems sharing the legal arena: the European Patent Convention (EPC) and the national system. And maybe a new one will come into being as the Unitary Patent system is still struggling to get a piece of the action (although at the moment Spain and Italy have refused to adhere to it). In order to ease the coexistence of all these systems, the Spanish legislative put a new Patent Act draft on the table concerning the national patent system, which is still waiting to be passed. It intends to accommodate the granting of national titles to the new drafting of the European Patent Convention 2000.
Within this new piece of legislation there are a number of changes but the most relevant ones are:
•the suppression of the possibility of obtaining national patents without previous examination of novelty and inventive step, which will be mandatory at any time;
•the internationalisation of the prior art assessed when considering the novelty and inventive step of utility models;
•the addition of a post-grant opposition for both inventions and utility models; and
•the addition of the possibility of limiting the patent before the Spanish courts once its validity has been put at stake.
The first amendment could be seen as a way to prevent a considerable number of patent applications from being granted. Nonetheless, this foreseen consequence is arguable. The current use of the patent application without previous examination is, as a viable and low cost option, providing a priority date for the European patent, while considering whether to apply for it. Moreover, it will deter Spanish inventors from patenting any technological progress because by making the previous examination compulsory, the application expenditures will increase.
The second amendment puts the prior art for assessing utility models at the same level as the patents one. At the moment, the relevant prior art considered for assessing utility models is restricted to the one disclosed (not only made available) to the public within the Spanish territory.
The third amendment is generally well regarded by practitioners as by just a simple administrative procedure, it will enable plenty of patents lacking the patentability requirements, to be left out. However its deadline has caused an outcry as it is considered excessively short.
And the fourth amendment accepts limiting the patent specification after its granting before courts when its validity is questioned, but it does not provide the consistent procedural law changes. It creates a need to frame the procedural time to limit the patent specification as the new version would be the basis for the trial.
Furthermore, in light of these last two changes, the new patent Act draft introduces a new cause of revocation, as the EPC does in its Article 138.1.d, because of the extension of the patent protection. These amendments will also force a change in the Spanish procedural law norms to face this new situation where patents can be limited before courts.
Spanish civil proceedings, where patent actions are framed, are very simple and only enable each of the parties to submit one allegation writ (lawsuit in the case of the plaintiff and opposition writ in the case of the opposing party). This simple procedure has raised some concerns on how to adapt proceedings to this new ability to limit patent claims and the legislative is still working on it.
Sabine Agé: A French statute entered into force on 12 March 2014, which aims at improving the position of IP rights holders. The use of various means to evidence the infringement, besides the saisie-contrefaçon, is encouraged; the criteria to calculate the damage suffered by the right holder are clarified; the statute of limitation is raised to five years (instead of three) and provisions relating to customs seizure based on patents are introduced into national law, which will therefore be used in addition to EC regulation No 608/2013. French judges pay more attention to the case law of the other specialised courts in Europe, which requires keeping up to date not only on national case law but also on the decisions coming from abroad. France ratified the Agreement on the Unified Patent Court on 14 March 2014. Though its entry into force is postponed to late 2015 at the earliest, the Unified Patent Court is the subject of intense discussions with patent owners who want to prepare for the new system and practitioners who intend to influence the law-making process by commenting on the draft rules of procedure and the tasks endeavoured by the preparatory committee. We closely monitor the progress towards the adoption of a final version of the Rules of Procedure and the preparation for the new system (training of judges, code of conduct for lawyers practising before this new court, etc).
Will Cook: All current signs indicate that the introduction of the Unitary Patent and the Unified Patent Court (UPC) system will be the single most significant change in patent enforcement practice across Europe ever. The new regime will allow the existing European Patent Office to grant a single unitary patent, which will be capable of being enforced or revoked centrally through a new “Unified Patent Court” in participating EU member states. Even if several companies (eg, big pharma) opt out of the system, it is likely that NPEs will use it. Companies must rethink their patent defence strategies across Europe: the UPC will exist in parallel with the existing systems for many years.
The UPC system should provide a cost-effective way of enforcing patent rights across the participating EU member states. However, the prospect of litigating over one single patent across multiple jurisdictions also presents a higher risk strategy for patentees and infringers alike, as an adverse decision would be applicable throughout all relevant EU member states. The benefits of UPC come with a degree of loss of control over the proceedings which is present in the current, fractured system.
There is much still to be settled for UPC before its (anticipated) launch in late 2015/2016. My firm has been educating clients on the effect of the detailed new rules and consolidating our own resources across Europe to ensure we are one of the “go-to” firms for litigating in all major divisions of the UPC.
More locally to the UK, and with immediate effect, there have been recent amendments to the Civil Procedure Rules that have brought changes in our practice relating to costs, disclosure exercise and evidence.
For patent cases with a value (eg, potential damages) of less than £10 million, parties are now required to file (at court) and serve (on the other side) costs estimates for the litigation. Failure to do this could result in prevention of recovery of costs. Strategically, it means that both parties will have a much better idea of the resources being thrown at a case by the opposition.
Parties are also required to file and serve a “disclosure report” at an early stage, and agree with the other side how disclosure is to be carried out. This should ensure that disputes over disclosure (eg, the scope of relevant search for documents, the treatment of third party supplier information) are minimised, or at least dealt with earlier.
The Court also has powers to control witness evidence by giving appropriate directions to identify or limit who should give evidence and on what issues. The rules also allow parties’ experts to give evidence concurrently. The movement towards a UPC-type system has already begun.
Pravin Anand: Patent law practice is undergoing gradual changes as courts push the envelope and create jurisprudence in favour of patentees. Over the years, Indian courts have reduced the procedural hurdles to the enforcement of patents, with steps such as mandating fast-track trials for IP-related matters in an otherwise coarse system of justice delivery (courts may direct litigants to conclude trials within four months); entertaining quia timet patent actions based on “apprehension of infringement”; granting ex-parte ad interim injunctions in a patent infringement action where the patentee has made out a prima facie case of infringement; and recording witness evidence via video-conferencing, enabling foreign witnesses and experts to depose from their home country if they are unable to travel to India for the trial.
Some of the anxieties of patentees, owing to the bureaucratic and procedural delays in the justice delivery system, have been allayed by such innovative procedures. The remaining challenges concern the development of the law itself; one way in which that has been tackled by the firm is by introducing Indian courts to the practices, procedures and doctrines followed in foreign jurisdictions.
Patent law has not undergone any significant changes recently. However, interpretation of the law, particularly the mandatory disclosure requirements for corresponding foreign applications, has been very strictly interpreted by the Intellectual Property Appellate Board and is now being used as a major defence in a number of recent patent litigations. The firm has responded to this challenge by placing this disclosure requirement in the international context and by continuously highlighting the importance of intent and materiality for its assessment.
The practices and procedures adopted by the IPO have also come under stricter scrutiny leading to patentees agitating its malpractices before courts.
WWL: Is the patent legal marketplace becoming increasingly competitive in your jurisdiction? Have you seen an increase in the number of IP boutiques? Which model of law firm – full service or boutique - best serves clients?
Andrew Shaughnessy: The legal marketplace is becoming increasingly competitive, with clients under pressure to reduce their external legal expenditures and law firms more aggressively pursuing business. We believe that the full-service model best serves clients. The important concept here is providing the options for clients to more conveniently take delivery of all the services that they need. At Torys, just as at a high-quality IP boutique, we have no shortage of expertise in patent and trademark contentious matters, advisory services and preparation and prosecution. But, for a client seeking IP services we can also, if the client has the need, deliver advice in the important interface areas of competition (anti-trust) and regulatory, as well as tax and corporate. With volume comes the added flexibility when it comes to fees.
Jorge Grau: Certainly, Spanish IP litigation has been gaining more and more clout within the legal sector during recent years, and we expect that tendency to continue.
This increase has not translated into the creation of new IP boutiques, however – rather, in the enhancement and enlargement of the IP departments of traditional full-service law firms.
Nevertheless, as can be inferred from our own firm (currently an IP boutique of 31 lawyers), we are in favour of the service provided by IP boutiques in contrast to that provided by full-service law firms. In our view, any IP boutique, in order to provide the best possible service, must be big enough to reach a certain critical mass allowing it to keep updated on all IP matters. In fact, among Spanish IP litigation law firms, our boutique is larger than the IP department of any of the largest full service law firms.
Sabine Agé: The patent legal market is no more competitive than in previous years, with only a few newcomers. The main players are dedicated IP boutiques such as Véron & Associés, which is 100 per cent patent litigation, or others that deal more broadly with all intellectual property rights and IT. The patent litigation teams of full-service firms – be they based in the US, the UK or France – are also active. None of these models is better than any other: depending on the needs of clients and the features of litigation, different models may be the right fit. Sophisticated clients who have a good knowledge of the European legal market prefer highly specialised IP boutiques to one-stop shop International firms.
Will Cook: There has been a marked increase in the patent-related work in the UK courts in recent years. This has resulted in the expansion of the leading IP specialist firms (IP or patent boutiques), namely Powell Gilbert and my firm, Marks & Clerk Solicitors (MCS). These two firms, along with Bird & Bird, account for a large proportion of patent litigation cases in the courts at present, especially in the High Court: much of the knowledge and experience accrues to such firms.
In the case of MCS, we ensure our core patent litigation expertise is enhanced by deep knowledge and experience in related fields such as patent arbitration, mediation, competition law, FRAND, essentiality, patent licensing, border detention, life cycle management, SPCs and enforcement strategies across Europe.
However, several full service firms have excellent IP practices, and a few of those have first-class patent litigation practices.
The most important factors when selecting counsel must always be expertise, strength in depth and cost-efficiency. It is often easier for the specialist firms to satisfy all these criteria, but we do not have a monopoly on them.
Pravin Anand: Yes, the legal marketplace has become increasingly competitive for the relatively small number of practices handling patent litigation before Indian courts and opposition proceedings before the IPO.