Paper Name: REPORT: House of Commons Committee hears unified evidence on unitary patent proposals (Part II)

Bifurcation - litigating just one half of the
patent cookie can be satisfying
or unappetising depending if you are
a patentee...

Turning to the question of bifurcation, the Committee asked whether or not it was clear as to how questions of bifurcation would be resolved before the UPC. Mr. Carr explained that the problem with bifurcation at the moment was that in the UK, the courts generally do not bifurcate cases. The UK courts hear validity and infringement together on the theory that you cannot infringe an invalid patent - the rights have never been there. Germany, however, generally bifurcates and grants injunctions before hearing whether a patent is valid. The proposals had, Mr. Carr said, "fudged" the whole thing so that it would be up to the discretion of various local courts as to whether it would bifurcate or not. He stated that if Germany generally bifurcates and the UK does not, if you are a patentee you will start your claim in Germany because it is more likely you will win and have an injunction granted in your favor without having to deal with the pesky question of whether you rights upon which your relying even exist. Faced with this position the UK courts will either say that they do not care about this consequence and tell litigants to start in Germany if the prefer, or they will have to compromise their legal principles and start bifurcating. Mr. Carr concluded by examining the problems of bifurcation, especially for SMEs, whereby an SME may face an injunction which stops their trade due to having allegedly infringed another litigant's patent. However, three years down the line when the validity hearing takes place and it is found that the patent is invalid, that SME may have completely lost their business.

HHJ Colin Birss QC - Will our
extremely qualified patent judge
have to bid adieu to patent cases
in the PCC because
of half-baked
unified patent proposals?

The negative effects of the system on SMEs were also noted by the panel, including issues of language of proceedings being different for infringement and validity, the increased costs of such proceedings as a result, and the delay and the effect of improperly granted injunctions where patents are later held to be invalid. Mr Carr and Mr Roberts also explained that due to the exclusivity provisions in the proposals whereby the unified patent court system would have to, after a transitional period, be the only competent court in which to litigate unitary and European patents, the new cost-effective and quick procedures of the Patents County Court would no longer have a role to play for SME's who wish to cheaply enforce their patents. They instead would have to litigate their rights in the more expensive unified patent court system. For this reason, one may see users start harvesting national patents again, instead of European and unitary patents.

After so many negative comments about the proposals, Mr. Carr wisely interjected that he wanted to make sure that the Committee understood that the idea of having a single unitary patent system and unified court is a very good idea, but it was "the implementation as currently proposed" and what the proposals and idea had become that was the problem. Ms. Salmon also stated that the compulsory nature of the system would militate against the benefits of competition between courts - competition which in the UK's experience between the High Court and the Patents County Court has lead to improved procedures. Mr. Carr also stated that the current system would enable a great deal of jurisdictional forum shopping.

Mr. Stephen Phillips MP

Returning to the point that Mr. Carr had hinted at at the beginning of the session, Ms. Mordaunt asked why it was so important that the Central Division be in the United Kingdom. Mr Carr replied:

"I think there are a few reasons. The first is, let’s assume this is going ahead, we can talk about the problems but, let’s assume it’s going ahead and as I have said I think it has an appearance of a train that is not stopping anywhere. I do not personally feel it’s an option for the UK to opt-out because if you opt-out you will be marginalized and patent litigation will take place outside the UK. Assuming, it continues, if we get the Central Division, whoever gets the Central Division, will be able to mitigate or to put its own national stamp - because it’s the most important place – on how this Court works. So for example, there will be decisions the Central Division makes that will affect everywhere and you will be able to mitigate, definitely, the most serious effects. The second point is that this is going to be a really important European institution – we don’t have them. Germany already has the EPO. If Germany gets this court as well, aside from the economic benefits I have discussed, you also have the situation which militates against fairness. That the very place, and indeed I think Germany proposed to have it in Munich, that is granting the patents is deciding on their validity as well, and that to me does not have a perception of justice at all. And the third reason I point to, is simply the economic benefits for the UK if we do get the Central Division in terms of skilled employment, of vast increase in patent litigation and the opportunity to use and expand our expertise."

Ms. Salmon agreed and cited a figure from a letter from IPLA suggesting that an estimated figure of annual turnover would be around 100 million pounds which did not include the fees of patent attorneys, support services, experts, litigation services, etc.

Continuing
the AmeriKat's "Flag on T-shirts"
theme, the French flag on a t-shirt

Mr. Carr, in closing, again stated that it was for the reasons previously mentioned that it was important for the UK to get the Central Division. He also stated that, with the greatest respect, France as the suggested default position between Germany and the UK just did not have the patent expertise and tradition of patent decisions that the UK ["Or indeed Germany", says Merpel] possessed. Mr. Cash MP questioned whether if the UK gets the Central Division, the concerns presented by the panel during the hearing would diminish. The panel stated that on balance they would like it to be in the UK in order to try and mitigate the problems which plague the current proposed system however that would in no way change the basic concerns about the substantive provisions in question. Mr. Cash MP then asked the panel to include in their further paper any other issues they wished to address in light of the Committee's questions, including reasons why the UK government was so "keen to press on and the effect on UK interests."

Dr. Christian Gassauer-Fleissner
(EPLAW)

Dr. Christian Gassauer-Fleissner, President of EPLAW, was the last witness of the session and was posed the same questions as the first set of witnesses. He appeared on behalf of EPLAW who has been campaigning on this topic for a long period of time. EPLAW's campaign had specifically been undertaken by his predecessor, Dr. Jochen Pagenberg (see AmeriKat post here). Dr. Gassauer-Fleissner stated that EPLAW had made very similar comments and criticisms to the system to the Commission but that nothing had been really taken on board. He explained that in relation to the specific concerns (more on this below), the Commission never made any official response to EPLAW. He stated that there may have been some friendly acceptance of EPLAW's arguments in discussions but no one had taken on any of their proposed modifications and everything EPLAW had said had been ignored by the Commission. He also stated that the "proposal as it is tabled now will create more problems than it will solve. EPLAW certainly disagrees with what the Commission is saying about the possible merits of the drafts as they are on the table now."

Turning to the specific concerns with the substantive proposals, Dr. Gassauer-Fleissner stated that most of had been addressed by the previous panel. He stated one of the concerns was

"...the inclusion of Articles 6 to 8 and the consequence that the ECJ would be involved in matters of substantive law...There are various important issues – one is a timing issue. The involvement of the ECJ will delay infringement proceedings for years. Second is the cost…and third, which is maybe the most important, is that the judges at the ECJ do not have patent law expertise and this is the point where I personally really do not understand the approach because what we are talking about here related to the UPC system, if I may call it that, is to get as many experienced patent judges as possible and get away cases from local courts that do not have patent experience in the first instance. What is proposed now is that there should be experienced local divisions/regional divisions at the lower level at the first instance and at the Court of Appeal there should be experienced judges (aside from the question of where they will come from)...but then at the highest instance, at the ECJ, there will not be any experienced patent law judges any more. In a way, what you can criticize about the system as it is now in some countries, is that at the lower level of courts you don’t have patent law expertise of the judges, and now you are turning it upside down and creating a problem at the highest instance....
. . .
One other thing, of course, is the issue of the costs – nobody knows what this is going to cost. On the one hand, currently at least in my country, even the Government does not know what it would cost because there are still disputes about where the local divisions would be and whether each country would have a local division. Second no one knows what the court fees will be. Nobody knows what costs will be reimbursed... by the successful party."

The consequences of "chilling effects: that the AmeriKat
would like to see....

He also stated that the value of the patent has the potential to be diminished if SMEs do not have the funds to be able to enforce the patent. Such a loss in the ability to enforce a patent and benefit from the revenue streams otherwise associated with the enforcement of the patent and the corresponding market share, would mean that SMEs and other companies may not have the funds to reinvest into research and development. Essentially, the proposed system may result in a chilling effect on innovation.

Mr. Cash MP, turning to the Committee's now most-asked question, asked

WILLIAM CASH MP: If the evidence that we have received, and it seems pretty conclusive, is that intellectual property judges, practitioners and the industry all over Europe, by the sound of it, are so against the proposed regulation and agreement, why is it that these proposals are being pushed through and hurried through in Brussels?

DR. GASSAUER-FLEISSNER: I don’t know. I think the only reason I can see the one that was also mentioned earlier - that the previous Presidency wanted to present some kind if success after many years of discussions. I may add one thing to what was said before. I am pretty sure it was not German industry that pushed this because as I said before my predecessor, who was German, he really was campaigning almost half of his time against this. I don’t think there were particular German interests behind this.

One of the last questions of the session was regarding whether the system would result in "overt forum shopping", which seemed apparent given that some countries would be expensive, others would not be, some would have suitably qualified patent judges, others would not, some would be easy to establish infringement, others would not. Dr. Gaussauer-Fleissner said that it "may definitely lead to forum shopping for obvious reasons." He also agreed that the sourcing of experienced patent judges would be problematic and that given there was a "high risk" that the new system would not work, the system should not be exclusive. Although, Dr. Gaussauer-Fleissner agreed on the majority of the comments addressed by the first panel he commented that bifurcation works and it works in his country and he also did not touch on the topic of the seat of the Central Division.

What's next?

The AmeriKat was impressed with how prepared the Committee was, how on point the questions were, and how well attended the session was (only a couple seats were free). Obviously, from the UK panel there were national interests that were at play in regard to the seat of the Central Division, however the AmeriKat was struck by how diplomatic the approach was in addressing the issues that concern all patent professionals and industry users across Europe.

What do the Fates have in store
for the unified patent proposals?

This week on 1 February, Minister Baroness Wilcox (and officials) will be before the Scrutiny Committee. The AmeriKat understands that her presence has also been requested before the House of Lords, but the AmeriKat has been unable to find confirmation of this on Parliament's website. The AmeriKat understands that the supplemental paper from CIPA and the IP Bar will be submitted prior to this hearing.

In the meantime, there has been little word from Brussels regarding next steps on the unitary proposals - save for a comment from President Barosso and a paper from the Max Planck Institute - but the next formal scheduled step is the plenary vote on on the proposals from 13-16 of February. What the UK will do in the meantime and whether and how other Member States will react is something the AmeriKat dare not predict. Despite the positive movement in the UK in respect of addressing the profession's concerns, she nevertheless fears that unless a radical step is taken not just by the UK but other Member States, the runaway unitary patent train will not be halted.

[Please note the AmeriKat would like to publish the written evidence of CIPA, EPLAW and the IP Bar Association, but under an obscure rule (so obscure she doesn't know what it is) she has been informed that she should not to publish the papers until they are themselves up on the Scrutiny Committee website - which sadly they are not yet. She asks that readers be patient, in the meantime. Also, if you see any error's with the transcribed sections please let the AmeriKat know - she listened to the recording a mere 10 times, but lost the will after the 11th....]