Patent Litigation Structures in Europe

(IPRinfo 1/2002)

Michael Schneider, Attorney at law, Scientific Researcher
Max-Planck-Institute for Foreign and International Patent, Copyright and Competition Law in Munich (Germany)

Patent application and granting figures are steeply increasing in Europe. Efforts to harmonize the procedures have failed so far.

Substantive patent law and granting procedures in Europe have successfully been harmonized over the last decades. The European Patent Convention (EPC) has just been revised and brought up to date by the Diplomatic Conference of 2000. Annual application figures for European patents reached 142 900 in 2000, with more than 27 000 patents granted, and were expected to pass the mark of 160 000 in 2001. These steeply increasing application and granting figures will eventually correspond to an increased number of patent litigation in Europe. However, all efforts to harmonize – and possibly centralize – post-grant infringement and invalidity procedures have failed so far. The following article tries to give a short outline of the current efforts undertaken on the EPO level to set up a European patent litigation structure.

The current European setting of patent litigation

Due to the inherently technical nature of patent rights courts of law called upon to decide questions of infringement and / or validity of those rights can only do so in a fast, efficient and convincing way that actually settles the dispute between the parties and clarifies the market situation if the procedures applied allow the judges to get a firm appreciation of the technology involved.

No matter what substantive patent law is applied to the concrete case the patent courts in any country have to mirror the technical questions raised during the granting procedure at the respective patent office – a procedure which at that early stage in a patent’s life is conducted almost exclusively by technically trained patent attorneys and examiners and not by lawyers.

To comply with these requirements any patent litigation structure in the first place has to provide for technical knowledge on the bench as well as before the bar. Furthermore a certain (statutory or factual) centralization of court structures concerned with patent litigation is needed in order to allow the judges and lawyers involved to develop an adequate level of expertise in the field, a goal which finally has to be brought into line with the somewhat contradictory requirement of accessibility of courts and procedures for the whole range of potential private and corporate parties.

Patent litigation in Europe is further complicated by the fact that under the current system inventors, patent holders, competitors and ultimately the courts have to deal with patent rights whose effect is still territorially limited to the individual country, even though the patent in question is a ”European” one granted according to the EPC and although most of the players involved in the game operate within the geographical, commercial and legal context of the single market established by the European Union. This not only means another burdensome doubling of efforts, time and costs for the enforcement of a patent right which – mainly due to translation requirements – already during prosecution is considerably more expensive than the patents granted by Europe’s main competitors. It also means a considerable amount of legal uncertainty since the courts of different countries seized with litigation concerning essentially the same patent have time and again come to remarkably different conclusions regarding not only the validity and/or scope of protection of the patent in suit but also regarding the very basis for their jurisdiction – the rules of the Brussels Convention (BC). EC-Regulation No. 44/2001 which will enter into force in March 2002 replaces the BC. Finally, the uncertainty about the jurisdictional setting of multinational patent litigation has given rise to the legitimate but nevertheless detrimental phenomena of ”forum shopping” between the courts of different contracting states as well as of ”torpedo” litigation strategies.

Solutions to this unsatisfactory post-grant setting have been sought on different levels ever since the signing of the EPC in 1973.

Revision of the European patent (litigation) system

A future European patent litigation structure will have to take into account the need for a common law of sanctions and remedies as well as of a common law of procedure. The language regime of proceedings will have to strike the balance between the legitimate interests of the parties (mainly of the defendant) and the need for efficient precedures allowing the participation of judges from different countries.

Furthermore a practical link between the different spheres of European patent litigation (i.e. national/EPO/Community) is needed in order to allow the operation of a high quality judiciary with a restricted number of judges and the territorial effect of decisions rendered by this judiciary has to enable parties to settle their dispute with one court action.

Over the last couple of years we have thus seen developments towards fundamental changes of the current patent (litigation) system: In 1999 and 2000 the EPO contracting states mandated a Working Party to work out a proposal for a European Patent Litigation Protocol, which would allow those contracting states joining it to transfer litigation concerning European Patents to a common judiciary.

The European Patent Litigation Protocol (EPLP)

Deviating from the original mandate, which had called for an integrated judicial system comprising uniform rules of procedure and (only) a common Court of Appeal discussions within the Working Party on Litigation (WPL), WPL soon took on a much more integrated approach.

The Structural Paper published in May 2000 outlined the creation of a European Patent Judiciary (EPJ) comprising not only a common Court of Appeal but also a common Court of First Instance, which would have jurisdiction to decide jointly on questions of both infringement and validity, including sanctions and injunctive relief with EPLP-wide erga omnes effect. This supranational first instance court would have to have some sort of local but nevertheless function according to a common law of procedure.

Number of judges

This far-reaching concept soon ran up against serious criticism and institutional problems, though. Since an average number of about 800 cases concerning European Patents can be expected (on the basis of the number of patents issued over the last years), mainly the number of qualified judges needed to staff such a centralized court alongside the existing national jurisdictions was raised against it.

A European patent court seized with this number of cases a year would need to be staffed with a total of about 52 judges, including 35 legal judges, if the chambers are to be staffed with two legal and one technical judge.

Regional Chambers

This criticism together with the need of some sort of local presence of first instance litigation voiced mainly by the users led to a change of concepts. Now the WPL – Sub Group has agreed on a model comprising a ”central” First Instance Court which will incorporate designated national first instance as Regional Chambers.

This first instance court (central and regional chambers) will be designated by the contracting states as their ”national” court for the purposes of Regulation No. 44/2001. The regional chambers will be internationally staffed by technical and legal judges of the court’s home country as well as at least one foreign judge.

Distribution of cases

In a centralized and only locally diverse court the distribution of cases is no longer a question of international jurisdiction in the strict sense of the word. Distribution of cases among the different Regional Chambers is supposed to be dealt with applying the rules of Regulation 44/2001 (i.e. domicile and/or place of infringement).

Considering the looming competence conflict regarding the EPLP between the Community and the member states negotiating the EPLP this certainly seems to be the most obvious solution. It would also incorporate the potential for the kind of forum shopping and torpedo strategies into the new system, though. It would be a big step forward to at least make sure that a positive infringement action always takes precedent over a negative declaratory action as to jurisdiction.

Territorial Effect of Decisions

The territorial effect of EPJ infringement and invalidity decisions is one of the most decisive questions concerning the future EPLP. At this junction fundamental civil litigation principles (e.g. the plaintiff’s power to determine the scope of his action) and the character of European Patents as a bundle of national rights will have to be harmonized with the vested interest of patent holders and competitors in settling a Europe wide patent conflict in one court action. Supposing that the jurisdictional ”trick” of designating the EPJ as national courts in the sense of EC-Regulation No. 44/2001 will stand the test and thus allow infringement decisions to cover the whole territory of EPJ states, these actions will not pose any problems.

Industry has time and again made it clear, though, that they expect the same for invalidity decisions and that they look at this question from both sides: on the basis of the high quality jurisdiction now envisioned in the draft EPLP they are prepared to accept a cross-border effect of revocations – on the other hand they expect a decision upholding a patent to have the same effect and to settle the invalidity question in suit once and for all Europe wide.

Although a comprehensive cross-border effect of invalidity decisions is desireable it clearly contravenes the bundle character of European Patents. The different parts of the bundle may be held by different proprietors in the various designated contracting states. They would have to be drawn into the litigation in some way if the decision was to have the intended effect. A possible way out would be to allow invalidity decisions of Regional Devisions to have an EPLP wide effect but to limit it to the parties involved in the concrete litigation (inter partes).

Interdependence with EC-Regulation No. 44/2001

On the Community level the rules of international jurisdiction in civil matters has been transformed from the BC into Regulation No. 44/2001 taking effect in March 2002. According to the established case law of the ECJ, the member states of the community are thus no longer competent to conduct negotiations towards and to conlude an international agreeement such as the EPLP that departs from the provisions of the regulation.

Article 22 (4) of Regulation No. 44/2001 establishes the exclusive jurisdiction of the courts of the patent’s registration country in the same way as Art. 16(4) of the BC does. The proposed exclusive jurisdiction of the centrally organized EPJ to rule on the validity of European Patents does, however, depart from the provisions of the Regulation. Accordingly, the EU Commission and the EU Council’s legal service has repeatedly stated that they regard the ongoing negotiations of the WPL to be ultra vires and the envisioned EPLP to be in breach of Community law.

From an institutional point of view this seems to be the corner and/or stepping stone of the whole construction. For one thing, the Commission’s assessment seems to be debatable, though. Article 22(4) of the Regulation leaves the exclusive jurisdiction for revocation with the national courts – but the underlying reason for this is one of sovereignty and not of defence of the defendant’s right to ”natural jurisdiction” as it is the case with the rules applying for infringement litigation.

Why should the EU member states not be free to transfer this sovereign right to grant and to revoke patents, which is not yet in the Community’s realm, to a common court system? And even if the Commissions view prevails this would only mean that they and not the member states were competent to negotiate and conclude the agreement – the substantive progress made should not be lost.

Appeals procedure

Finally, the appeals procedure is supposed to be limited to a review of the first instance decision, not admitting new facts and evidence in order to underline the function of the first instance as the qualified, strong, and respected patent trial court.
This seems to be necessary considering that roughly 2/3 of all cases are terminated in (e.g. settled) or after the first instance.

Procedural provisions

The EPLP is to include a full fledged procedural code to be applied by the EPJ in order to allow for a uniform way of dealing with proceedings in the various Regional Chambers.

In order to assure stringent and fast proceedings that allow (normal) cases to be decided within 12 – 15 months the draft EPLP includes provisions for an effective case management by the court. As part of the effective case management and procedures the EPLP will further provide the EPJ with powers to compel the parties and – in exceptional cases – third persons to produce evidence. Likewise procedures will be introduced into the European procedural law allowing the courts to order the inspection of (business) premises and the seizure of infringing evidence as well as to compel parties not to move or deal with assets within the court’s jurisdiction in order to safeguard the plaintiff’s (potential) damages.

With regard to these orders procedural precautions will have to be included in order to avoid mere ”fishing expeditions” by competitors. This will be done by setting a fairly strict time limit for the commencement of the main procedure as well as a liability of the applicant for any damage caused by the measure.

The language regime for EPJ proceedings is another key element of the EPLP. Problems are mainly connected with the local presence of Regional Chambers. The Central Chamber will be using the EPC language of the patent and the Appeals Court will follow the first instance EPC language.

The draft EPLP tries to follow as closely as possible the compromise struck for post-grant translations in the EPO Protocol on Cost Reduction. The latest version of the draft EPLP suggests a rather complicated mechanism to determine the language of proceedings before Regional Divisions: based on the language at the domicile of the defendant the aim is to generally arrive at the language of the Regional Chamber seized. This certainly seems a sensible solution keeping in mind the restricted number of judges, attorneys, etc. available.

European Industry representatives have submitted a different proposal, which leans somewhat more in the direction of the quasi universal patent language English. It would basically add the possibility for parties so submit oral and written submissions for proceedings before all Regional Divisions in English, notwithstanding the EPC language chosen by that Division. Translation costs into English before an English-speaking Division would have to be born by the parties, translations into the non-English EPC language of the Division would have to be borne by the court. This proposal seems to be turning the right screw (i.e. translation costs) and reflects the fact that English as de facto universal patent language will probably prevail any how once a multi-national system has started to operate successfully.

Outlook

The work on the EPLP towards an effective litigation scheme for European Patents has well advanced, and it is certainly moving in the right direction. The draft EPLP including the provisions mentioned above will be put into treaty language in the first half of 2002, and the vision at the moment is to put it before a further Intergovernmental Conference for adoption in 2003.
The setting of European patent litigation will not change overnight, though. In the draft a transitional period of 7 years is provided for, which will allow judges, users and lawyers alike to test and to adapt to the new system. Notwithstanding the pitfalls connected to the still unsolved fate of the Community Patent and its repercussions on the EPLP we are in an excellent position today to see before long a soundly constructed and well functioning European patent litigation system along the lines pointed out above.

 

Michael Schneider
The Finnish Industrial Property Association and the Finnish AIPPI Group invited Michael Schneider to act as guest speaker in a meeting arranged by the Associations in December 2001. Mr Schneider gave a lecture on recent developments in the patent litigation structures in Europe.

Schneider studied law at the University of Passau in Germany and Tours in France and took his First State Exam in 1998. He took his Second State Exam in 2000. He was also at the United States Court of Appeals for the Federal Circuit (Patent Appeals Court) in Washington, D.C. for three months in 2000 as a part of an internship program.

Since August 2000, Mr Schneider has worked as a scientific researcher and Ph.D – candidate at the Max-Planck-Institute for Foreign and International Patent, Copyright and Competition Law in Munich. His research covers various national, as well as the European, patent litigation systems. His supervisor in his research work is Professor Joseph Straus. Mr Schneider has also been a an observer in the German group in the sub-group of the Working Party on Litigation. The aim of the Working Party is to prepare a proposal for an optional protocol concerning patent litigation under the Convention on the Grant of European Patents.

Since October 2001, Mr Schneider has been an assistant to the Chairman of the EPO (European Patent Office) Administrative Council in Munich.