Cross Border Relief à-la-US

In Europe we had our time when the Netherlands courts, soon followed by courts in Germany, rendered cross border relief under a European Patent in most of the 90’s. This effort to create a truly European wide enforcement of patents after a uniformed granting procedure, was stalled after the ECJ’s decisions in GAT vs. Luk and Primus et al vs. Roche.

In the US extra territoriality is now also at the heart of a judicial review. On October 27, the US Supreme Court granted certiorari (accepted to hear a case) in the Microsoft vs. AT&T case. In 1984 the US Patent Law (article 35 USC § 271(f) extended infringement liability for the export of unpatented physical components of a patented combination. The current precedent is the “Deepsouth” case in which it was held that making and shipping component parts of a patented combination invention did not constitute ‘making’ the patented invention in the United States. In the pending US case this position will be reconsidered by the US Supreme Court. It will have vast consequences.

see Prof. Harold C. Wegner’s paper “Microsoft Extraterritoriality: “Mutiny…Heresy” where he argues that while the Microsoft case is generally understood in the business press as merely involving whether there is liability for the export of software to be loaded onto original equipment personal computers, this is an oversimplification of the issues. In fact, there are two issues before the Court, Prof. Wegner argues, the first questioning whether software or object code is capable of being a “component” of a patented combination for purposes of the statute, and only in the second instance whether there is infringement liability.

See also the US patent weblog Patently-O.

British Court of Appeal reviews business method and software patents

On October 27, the UK Court of Appeal handed down its judgment in two cases concerning the exclusions to patentability for business methods and computer programs under Article 52(2) and 52(3) of the EPC (s1(2) PA 1977), the first between Aerotel Ltd vs. Telco Holdings Ltd. cs. and the other in the matter of Application Neal William Macrossan.

Mr. Macrossan’s patent application claimed a patent for an automated method of producing and acquiring the documents necessary to incorporate a company, through communication between a remote server and a user. The application for a patent was refused by the hearing officer, on the grounds that it fell within the exclusions from patentable inventions. She concluded that the invention amounted to a method of performing a mental act, a method of doing business and a program for a computer. English case law at the time of the hearing was taken to have established that an invention which at first glance fell within the excluded categories (because it relied on a computer program) could nevertheless be considered patentable if, and to the extent that, it were found to provide a “technical contribution”. For example, a computer program which speeded up the operation of equipment could be considered to provide such a “technical contribution”, and therefore not amount to a computer program “as such”.

The hearing officer concluded that the claimed invention provided no “technical contribution” sufficient to take it outside the excluded categories, rather it “merely reduced cost, labor and error”. Mr. Macrossan appealed this decision to the High Court, where the case was considered by Mr. Justice Mann. Mann J’s only point of divergence from the decision in the Patent Office was his finding that the claimed invention was not excluded as a “method of doing business”, drawing a distinction between methods of carrying out business (excluded) and tools which might be used in a business (not excluded). He stated that “The activity involved in the invention is a business service, or end product, for which the customer is prepared to pay and for which the customer contracts…but that is not what the exclusion in the Act is aimed at, in my view”.

Since the decision of the hearing officer in March 2005, the decisions in CFPH LLC’s Application and Halliburton Energy Services Inc v Smith International (North Sea) Ltd [note] had been taken by some as having altered the approach to be taken by the Patent Office to the application of the exclusions, in particular by de-emphasizing the “technical contribution” element of the test. This approach had apparently been subsequently affirmed in Shoppalotto.com Ltd’s Application and Research in Motion (UK) Ltd v Inpro Licensing SARL.

As summarized by Mr. Justice Pumfrey in the Research in Motion case: “It is now settled…that the right approach to the exclusions can be stated as follows. Taking the claims correctly construed, what does the claimed invention contribute to the art outside excluded subject matter?”. Separately, Aerotel Limited sought to rely on a patent for a pre-paid telephony system, which was attacked on the grounds of excluded subject matter.

The Court of Appeal decision

The Court of Appeal thoroughly reviewed the national and EPO decisions and concluded that “the time has come for matters to be clarified by an Enlarged [EPO] Board of Appeal,” because the existing EPO decisions were contradictory. The Court did not concern itself with political considerations or any views either way as to whether the exclusions were “a good thing”. It noted the broader approach taken in the USA but did not find it a helpful guide. Although there was a “need to place great weight on decisions of the [EPO] Boards of Appeal”, to do so in this area would be premature, the Court felt, given the fact that three distinct new approaches had emerged in the EPO case law, each to some extent in conflict with the others.

The Court therefore suggested that this was a point of law which it would be appropriate for the President of the EPO to refer to an Enlarged Board of Appeal, and the Court ventured to suggest questions to assist the President in formulating the reference. Until such a reference, however, the court declined to follow the EPO cases, considering itself bound by its previous decisions and, in particular, Merrill Lynch’s Application. This meant applying the “technical effect” approach, which it summarized as: “Ask whether the invention as defined in the claim makes a technical contribution to the known art – if no, Art 52(2) applies”, with the ‘rider’ that “novel or inventive purely excluded matter does not count as a ‘technical contribution’”.

It was also agreed that, although there are different reasons for the different exclusions, a common approach can be adopted by applying a four-step test:

(1) properly construe the claim;

(2) identify the actual contribution;

(3) ask whether it falls solely within the excluded subject matter; and

(4) check whether the actual or alleged contribution is actually technical in nature (although this step, required under Merrill Lynch, may be superfluous).

Aerotel was allowed to keep its telephony patent, but Mr. Macrossan fared less well. The Court of Appeal did doubt whether Mr. Macrossan’s invention constituted a method of performing a mental act: “we are doubtful as to whether the exclusion extends to electronic means of doing what could otherwise have been done mentally”, but did not decide that one way or another because it was firmly of the opinion that the invention was both a method of doing business as such and for a computer program as such.

By finding that the invention was a method of doing business, the Court of Appeal disagreed with the High Court Judge, and concluded that drawing a line between excluded abstract methods and tools which might be used in a business was not feasible. In addition, the requirement implicit in Mr. Justice Mann’s reasoning that the exclusion should only apply where what is claimed involves the completion of a business transaction was also overruled, with support being found in the French and German versions of the European Patent Convention.

The Court then went on to apply the re-formulated four step test in light of the business method and computer program exclusions:

(1) the construction of the claim presented no difficulties;

(2) the actual contribution of the inventor – “what he added to human knowledge” – was said to be that “he has thought of…an interactive system which will do the job which otherwise would have been done by a solicitor or company formation agent” and has provided “a computer program (in practice probably an interactive website) which can be used to carry out the method”;

(3) these contributions were considered to fall solely within excluded subject matter: “Mr. Macrossan’s method is for the very business itself, the business of advising upon and creating appropriate company formation documents” and “the contribution is just the devised program up and running”; and

(4) no technical contribution was found: “there is obviously none beyond the mere fact of the running of a computer program”.

Comment

The decision in this case should bring clarity to the approach to be taken by those applying the exclusions in the UK. It has not, however, broadened what is patentable. It is a judgment that appears to be tinged with regret. First, because the Court of Appeal could not itself force a reconciliation of the conflicting EPO authorities, and second because the Court was obliged to apply Merrill Lynch with its emphasis on “technical contribution”. It is apparent that the Court would have preferred to view technical contribution as inherent in the question, “does the contribution consist of excluded subject matter as such?”. In addition, the Court commented that in its view the EPO cases tend to take too generous an approach in relation to computer programs. That is, the Court criticised EPO decisions permitting patents for software recorded on some form of media, indicating that the framers of the EPC meant to exclude computer programs in a practical and operable form, not just in the abstract. The UK Patent Office should now be clear as to the correct test. But this approach may well need revisiting if the EPO Enlarged Board of Appeal does have the matter referred to it.

Nevertheless, even following such a clarification, given the EPO case law (however contradictory in approach) in our view it is unlikely that business methods will become patentable in Europe (as they are in the USA). And the patentability of software inventions in Europe is likely to remain debatable for some time.

Jeremy Morton, Simmons & Simmons, London, UK (see also Simmons IP news alert
[note: see also note Severin de Wit in publication in Dutch IP magazine IER ("Intellectuele Eigendom & Reclamerecht", with Dutch comments.

Second Patent Auction by Ocean Tomo, critical views on auctioning patents

October 25 and 26 the second public patent auction, organized by Ocean Tomo, was held in New York. The first one, in San Francisco on April 5 and 6 had, at best, mixed results. 78 lots of patents ranging from material science, automotive industry, bar code scanners/radio frequency identification (RFID), information technology, to name a few, were among the technologies covered.

In the October 2006 issue of Journal of Intellectual Property Law & Practice (published by Oxford University Press) Dr. Hidero Niioka presents a highly critical view on this new phenomenon. Although patents attract attention as high return on investment opportunities, patents are also notoriously unpredictable to put a value on, Niioka observes. Patents were until recently practically only traded by private dealmakers. Such deals are concluded in negotiations, beyond the public eye. Auctions have surely changed that and have made valuation of patents more visible. Dr. Niioka sees an increased interest in commercialization of IP by IP merchant bankers, brokers and attorney firms. In analyzing the results of the first public auction in April 2006 he concludes that the bidding process was a deception, where it only generated US$ 2,75 million for 24 out of the 78 lots sold. The lowest selling price per patent was about US$ 555, the average price for a patent sold, US$ 30,344, hardly enough to cover the costs of the patent.

In an interesting article dr. Niioka, he described the Gold Rush climate that surrounds patents, exemplary by the RIM vs. NTP, Inc case, that ended in a US$ 621.5 million settlement in favor of NTP, a patent holding company. Niioka signals an “information asymmetry” between the seller and a buyer of patents. IP asset transactions give the purchaser, unlike in an M&A transaction, the chance of a more business and investment relevant information than the seller.

In the last paragraph of his article he doubts whether public auctions, like the one Ocean Tomo organized yesterday and today in New York, are a good marketplace for investors looking for valuable patents. Time to get sufficient due diligence is too short, argues the writer, but more importantly whether valuable patents will ever be auctioned. Auctioneering patents is an indication that the seller does not consider these patents any longer as “core business”, not having a reason anymore to keep the patents for themselves. This may indicate that the seller is out of a particular business or that the patents he auctions are “old timers”, not current technology. Niioka observes that it is improbable that large companies will not make an arbitrary choice regarding which patents to pass along to a patent auction. Nobody wants to create their own competitors either, nor do sellers want their patents to be picked up by patent trolls. There are other issues however that dr. Niioka does not mention. To name one: in a public auction one cannot make specific deals, that are possible in private deals, like a provision covering the situation that the seller is being attacked by a third party for patent infringement, where he can still invoke - his formerly owned – patents, now in the hands of the buyer, with his assistance and against a certain remuneration.

Niioka concludes that entrusting a patent portfolio to an IP merchant banker or patent broker or other IP professional is a better and safer way for a patent holder to exploit his IP.

A political brawl between Germany and France over EPLA

A seemingly innocent European Commission memo, called “Communication from the Commission to the European Council (informal meeting in Lahti – Finland, 20 October 2006), An innovation-friendly, modern Europe” turned into a row between Germany and France.

What happened? Well, have a look at the Commission’s document on page 6.
It says: “The adoption of a cost-effective Community Patent is the most important step.”

Nothing wrong, you would say. Except that in the original document the word “Community patent” did not appear. It said “The adoption of a cost-effective EPLA is the most important step.”

Some high ranking French official, based in Brussels and well connected within the EU Commission, changed on his own authority the word EPLA into “Community patent”, worse: without the knowledge of the two responsible EU Commissioners, Mc Creevy and Verheugen.

So that’s the way politics creep into the EPLA debate. Thought that only happened in Banana Republics?

Patent Review, Back to the Future?

When the United States enacted their first Patent Act in 1790, they made the issuance a matter of the highest importance. There was no patent office. The president himself (George Washington) with assistance of a committee of three (Thomas Jefferson, Henry Knox and the Attorney General Edmund Randolph) met on the last Saturday of every month to review each and every patent application. They established strict rules for obtaining a patent [1].

Although that resulted in too few patents and was soon changed to allow patents without any substantial patent review, this first system of a Patent Review Board consisting of politicians rather than technicians, was never repeated again in any patent system after 1790.

This may soon end. If the European Parliament gets its way, review of patent applications must be a job done under “democratic” supervision. On October 12, the European parliament agreed by a large majority to the European Commission’s plan of going forward with talks on patent reform in Europe, but with a number of amendments to the current plan aimed at ensuring “democratic control” of the process. The vote of the EP was on the Commission’s plan to support the EPLA (see earlier IPEG posts), so the question whether the European Community should “accede to” the European Patent Litigation Agreement (EPLA), which would mean –among other things - the setting up of a European patent court.

Do we want politicians to rule on novelty and inventive step? Hell, no! This very idea signals a worrisome trend in the way politicians look upon intellectual property. Where European innovation falls significantly behind the US and Asia and China surpasses Germany as the 5th world largest supplier of patent applications one would expect European politicians to focus on enhancing innovation rather than beset us with ludicrous ideas about “democratic” review of how patents are being granted by the EPO. European Parliament’s engrossment with so called “undesirable patents” coming out of the EPO (an allegation grossly exaggerated, see memo Severin de Wit to the Dutch Ministry of Economic Affairs of April 15, 2005) prevents a fact-based discussion on how to improve the patent system. It misguidedly focuses on issues that are irrelevant and do not at all help us making the patent system a more effective instrument to further innovation.

The idea of “democratic supervision” is both without merit, incomprehensible and legally nonsensical. Without merit because the question whether a patent has been rightfully granted by the European Patent Office is ultimately for the judiciary to decide, not the lawmakers, nor the executive. Incomprehensible, because there are much more pressing issues to be resolved by European Parliament in making the patent system more apt to the 21st century. Last but not least the whole idea is legally nonsense.

Patents are being granted by the European Patent Office, which is the executive arm of the European Patent Organization, an intergovernmental body set up under the European Patent Convention (“EPC”), whose members are the EPC’s 31 contracting states. Established by the EPC (or “Convention on the Grant of European Patents”), signed in Munich 1973, the EPO is the outcome of the European countries' collective political determination to establish a uniform patent system in Europe. The activities of the EPO are supervised by the Organization’s Administrative Council, composed of delegates from the contracting states. Oversight is being conducted by this Council. Any member of the EU Parliament can lobby its own national members of parliament to take positions and come up with new ideas in the EPO’s Administrative Council.

So what is in the European Parliament members mind when they talk about “democratic” supervision? Do they refer to the concern that EPLA judges would be mostly recruited from the EPO’s Appeal Boards? That is a legitimate concern, but what has that to do with “democratic” review? Or do MEPs mean to say that the current ideas about EPLA and the proposed system of judicial review of EPO patents should not be done by contracting states individually (so by an international agreement between European states), rather than by means of EU legislation like the Community Patent? If that’s the case, again it is a point to make, but what does that have to do with democratizing the grant of patents?

Alternatively, is it that MEPs want to have a say what type of inventions qualify as a “patent” (vide the discussion on software patents)? Lets hope this is not what MEPs really want, because if they do, we better abandon the whole patent system altogether. Why would anyone be attracted by the idea that 732 MEPs vote whether an invention is novel and inventive, so worthy of a European patent?

[1]“Hot Property” by Pat Choate, New York 2005, p.27/28

AIPPI adopts resolutions on EPLA and other important patent issues

On 11 October 2006, during the 40th World Congress of the International Association for the Protection of Intellectual Property (AIPPI) in Gothenburg, Sweden, 1,500 national representatives of 44 countries voted on a number of resolutions on pressing IP issues.

A Resolution on EPLA (the European Patent Litigation Agreement), was accepted by the AIPPI representatives. It

"urges the member states of the European Patent Organization

a) to adopt EPLA after convocation of a Diplomatic Conference as early as possible.

b) to invite the European Community represented by the European Commission to co-operate in the preparatory work for the conference with the goal it being ensured that the legal rules of EPLA be in conformity with Community law."

Furthermore the AIPPI World Congress accepted a resolution on other important IP issues, among which the harmonization of national laws on assignment and license of IP rights and the treatment of IP licenses in bankruptcy proceedings.

The Resolution “Q190”, adopted and prepared by a Working Group and discussed by representatives of all countries present at the AIPPI World Congress, calls for harmonization of laws regarding the treatment of assignment of IPRs. IPRs can only be successfully treated as collateral if more certainty is given to the assignee of those rights, in many cases banks and other financial institutions. By doing so, the AIPPI working groups, supported by the General Assembly of the AIPPI, expects that the economic importance of IPRs and its use in financial transactions, will be enhanced.

(see column at the right side "IP Docs" for translations of the Resolution Q190 in Spanish, French, and German)

Further comment on CFS Bakel vs. Stork Titan

In patent infringement litigation (and for the infringement of certain other intellectual property rights), typically, a ‘letter before action’ will be sent as a final attempt to reach a settlement before issuing proceedings. In the Netherlands, these warning letters are often sent by means of having a bailiff issue a 'writ of warning'. On 29 September 2006, the Dutch Supreme Court ruled in the case CFS Bakel vs. Stork Titan B.V, after comparing the warning letter regimes in Germany and the United Kingdom, that the patentee who invokes a pre-examined patent (i.e. the Dutch part of a European patent) which is subsequently revoked or nullified acts unlawfully if he knows, or ought to be aware, that there is a serious, not negligible chance that the patent will not be maintained in opposition or revocation proceedings (see: earlier post on this blog http://ipgeek.blogspot.com/). The rights-holder may now need to exercise more caution or risk facing an action for ‘unlawful enforcement’.

Traditionally, the Dutch take a liberal approach regarding patentees (or other right holders, for that matter) for sending a warning letter to the competition (which is considered to be the first step in the enforcement process). In 2001, the Dutch Court of Appeal confirmed the rather strict test for the unlawful issuance of warning letters: the mere fact that a patent was ultimately revoked did not necessarily mean that the enforcement of the patent was unlawful. The patentee would be at risk of a claim that the enforcement was unlawful (only) if it knew or ought reasonably to have known at the time of issuing the threat that its patent was not valid [1].
In the Supreme Court decision in CFS Bakel vs. Stork Titan B.V., the test appears to have been somewhat revised, in that the patentee's assumed knowledge has now shifted from the fact that the patent is invalid to the fact that there is a serious, not negligible chance that the patent will not be maintained in opposition or revocation proceedings.

While one could argue that in any patent case there is a serious, not negligible chance that the patent is invalid, it does not appear at all to have been the aim of the Supreme Court to hold a patentee liable per se for its action for the very reason that the patent is being revoked in the end (with the implication of an inherently serious, not negligible risk that this would happen which the patentee knew or should have known). Contrary to that, in the grounds of its decision, the Supreme Court refers back to its own decision of 1962 [2] in which it was held that to make the act of issuing a writ of warning unlawful it is not sufficient that the pretension embodied in the writ proves incorrect in retrospect (either the asserted patent being (partially) revoked and/or the patent not being infringed); it required that blame for this act can be attributed to the patentee.

Subsequently, the Supreme Court refers to the regimes in Germany and the United Kingdom as regards issuing warning letters, and concludes that in neither of those countries it is accepted that a patent proprietor who has invoked his patent, is liable to compensate the damage suffered by his competitors or others as a result of this act, on the mere ground that the patent is subsequently revoked or annulled; the regime in both countries equally requires that some sort of blame can be attributed to the patentee, according to the Supreme Court. On the basis hereof, the Supreme Court holds that the patentee who invokes a pre-examined patent which is subsequently revoked or nullified acts unlawfully if he knows, or ought to be aware, that there is a serious, not negligible chance that the patent will not be maintained in opposition or revocation proceedings.

In its decision making, the Supreme Court for the larger part has followed the opinion of the Advocate-General Huydecoper. The Advocate-General in his opinion emphasizes that given the fact that the patent survived examination before the European Patent Office – which requires quite considerable efforts from the later patentee, and particularly serves the interests of the competition – 'one can not ask much more' from a patentee to verify that its patent is valid. The Advocate-General makes an exception to the rule, however, in case the later patentee withheld relevant information from the patent office, or acquires new information after grant which sheds a new light on the validity of the patent as granted. Unfortunately, the Supreme Court did not rule on these particular aspects. It therefore remains to be seen whether the Supreme Court decision is to be interpreted in accordance also with this part of the AG's opinion (which would definitively constitute a shift in case law).

Francis van Velsen, Simmons & Simmons (Rotterdam, Netherlands)

[1 Koppert-v-Boekestein, Court of Appeal, 20 September 2001, IER 2001/57
[2] Drefvelin-v-Wientjes, Supreme Court, 6 April 1962, NJ 1965/116

Is the patentee liable for wrongfully asserting his patent?

Last Friday, September 29, the Supreme Court of The Netherlands (“Hoge Raad”) handed down its decision in CFS Bakel B.V. vs. Stork Titan B.V. (Dutch, English translation here) which considered a patentee's liability for actions taken on the basis of a patent which subsequently turned out to be invalid.

Whilst apparently endorsing the earlier approach as set out in a Supreme Court case dating from 1962 (in the case Drefelin vs. Wientjes, NJ 1965/116), where it was held that a patentee would not be liable in tort unless he acted reprehensibly, the Supreme Court gave a further gloss to the test. It would appear that the standard for tortious liability to arise is now lower than it was previously.

The Supreme Court in CFS Bakel vs. Stork held as follows:

"This means that the patentee who relies on an examined patent which is later revoked or cancelled acts tortiously if he knows, or ought to understand, that there is a serious, non-negligible chance that the patent will not survive opposition or invalidity proceedings. The mere fact that an opposition or invalidity proceedings are pending is therefore insufficient reason for tortious liability to arise."

What the Supreme Court has done is to borrow a test from summary proceedings (where an injunction will be granted unless there is a serious, non-negligible chance that the patent will not survive opposition or invalidity proceedings) and use this as the basis for tortious liability. The test would seem to be more easily satisfied than the earlier test as applied by, for example, the Court of Appeal of The Hague in the case of Koppert vs. Boekestein (IER 2001/57). There, it was held that a patentee would behave reprehensibly if he exerted his patent rights whilst knowing or having a serious reason to suspect that the patent was invalid.

The test was similarly applied recently by the District Court The Hague in the decision of 13 July 2005 in the case of Astée Flowers vs. Danziger 'Dan' Flower Farm (BIE 2006/60), a case concerning plant breeders' rights. Here, the Court held that whether or not liability was made out was likely to depend on whether or not the right was relied upon within or outside the framework of legal proceedings, and whether or not the threat was directed against a primary infringer or against his customers in the marketplace.

The same test was also applied by the District Court The Hague in Wijbenga Machines vs. Eisenkolb (April 19, 2006) and in interim proceedings (by the same court) in Novogen vs. Care for Women (January 11, 2006). There, it was held that the fact that 19 oppositions had been filed at the EPO against the patent was not in itself a reason to find the patentee tortiously liable vis-à-vis the defendant. (The patentee had threatened the defendant's customers with infringement proceedings if they continued to stock the defendant's allegedly infringing product, and had omitted to mention the fact that the oppositions had been filed). The judge did however imply that continuing to threaten the marketplace with the patent after his own finding that the patent stood a good chance of being invalidated would be likely to give rise to tortious liability in the future.

Clearly, there is a difference between a party knowing or having a serious reason to suspect that a patent is invalid on the one hand and the situation where a patentee understands (or ought to understand) that there is a serious, non-negligible chance that the patent will not survive opposition or invalidity proceedings. Estimating the chances of success in a patent action is not an exact science. In cases which end up in Court, there generally will be (at least in the eyes of the alleged infringer) a reasonable chance that the patent will indeed be defeated (or that infringement will not be made out): otherwise the case would presumably settle. How the lower Courts will come to terms with the new gloss remains to be seen.

Simon C. Dack, Barrister De Brauw Blackstone Westbroek The Hague, Netherlands

EU public consultation on a Future Single Market Policy and SME’s

In an earlier post we referred to the launching by the EU commission of a hearing on a Future Patent Policy. The report of the public hearing as well as a summary of preliminary findings can be found at the EU Internal Market website.

On September 21, the EU Commission published the report of another public consultation, on the Future of a Single Market Policy, launched in April 2006. The results, as far as patents is concerned, aren’t particularly shocking. In the executive summary it refers only once to patents, saying:

“Many argue that improving the intellectual property framework should be treated as a priority, in particular in patents and copyright. Finally, many see the opportunity for fostering innovation through public procurement rules (including for SME’s) and stress the need for increased awareness-raising for public authorities and SME’s, and better implementation and enforcement.”

It strikes us as odd, that the continuous concern expressed for the position of SME’s does not translate into a more active attitude towards patent and innovation issues by those same SME’s and their representatives. Little is known (let alone being supported by research data) how SME’s are affected by the present patent system and in what sense they have are harmed by insufficient enforcement or access to that system. It is striking that it are the SME’s that actually fail to apply for EP patents, some noting the costs of application, but again little material substantiating this claim is being presented. Again and again the position of SME’s are being mentioned as being the main victim of high costs, little access to enforcement and other perceived disadvantages over bigger industry. We have still to see what evidence is being presented to support that. It becomes time to have a more active and conclusive SME organization stopping whining about the patent system, translations and barriers to access, but rather contributing to improvements of the present system, support for a uniform enforcement system like EPLA and present a workable solution for the always present translation issue.

EPLA, the next big thing, will it fly?

October will be an important month for the EPLA ("European Patent Litigation Agreement”) initiative. However, the initiative threatens to become prey to anti-patent lobbyists (formerly known as anti-software patent lobbyists). They are now taking aim at EPLA. Last week the European Parliament debated the issue with EU commissioner McCreevy, who finally spoke in support of EPLA (see earlier post: “EPLA, The Next Anti-Patent Punchbag”). Several draft regulations have been discussed. On October 12, the European Parliament will vote on motions and draft resolutions debated last week.

The current debate, however, is being distorted by arguments that EPLA is nothing but a “coverted” way to enable the much despised software patents ‘through the back door” (One blog gave a taste of this sort of bully arguments stating “EPLA=software patent”). The loudest antis among the lobbyists do not blench at spreading outright nonsense, wrongly citing industry representatives (GSK, Nokia) to “prove” that multinational patent litigation is rare in Europe and confusing legitimate concerns with opposition (issues about cost, independent and qualified patent judges, location of the court, languages, etc). Opponents, like was the case in the software debate, use manipulative arguments and in some cases plain nonsense to get their message across. A proper and sound discussion is not helped by some opponents’ arguments. What to think of a press release by the Green/EFA group in the European parliament, heading: “EU Commission must not introduce EU patents by the backdoor”. If this is the way in which such formidable legislative work undertaken by EPC countries and IP professionals, is being debated than expect not less than a similar fate for the EPLA as for the CII (the EU Directive on “Computer Implemented Inventions”) which was defeated in European Parliament last year.

Supporters of the EPLA are also to blame. They often speak with double tongue and seem unable to launch a strong unequivocal support for EPLA. The drafters of the EPLA, most notably also the patent practitioners, organized in EPLAW, remain silent if it comes to counter arguments by opponents.

One big difference though. The EU parliament has formally no say about the EPLA, as this is a proposed legislative initiative of the same countries that initiated the coming into existence of the EPC, the European convention that created a European Patent in 1973. It is not the EU Council or EU Commission that propose EPLA, so strictly speaking EPLA is simply not subject to EU Parliament approval. Yet, politically, EPLA will not become reality if the EU Commission (Commissioner McCreevy is forced to withhold his support for the EPLA. The anti software lobby seems to accept no les than that.

The EPLA is, by all means, the “next big thing” since the major legislative task of creating the European Patent Convention of 1973 (“EPC”) . More than 30 years after this successful creation of the grant of a single European patent, Europe has been struggling to find a way to also harmonize the enforcement of patents issued by the European Patent Office. To grant a patent along uniform rules was one thing, to create a system where holders of that right can enforce it all over Europe in a predictable, cost effective and uniform way, is quite another. What seems to be forgotten in the discussions is that strong patents are beneficial to innovative activities. Innovation through protecting inventions is at the heart of post war industry policies in Europe.

Practitioners have, on behalf of their clients, tried various other ways to create a EU wide enforcement system for European patents. The cross border practice, initiated by Netherlands and Germany was recently cut off as a enforcement tool by the ECJ in its GAT vs. LuK and Primus cs vs. Roche decisions. The Community Patent (“ComPat”) although not yet formally dead, is highly unlikely to ever revive, strangled in language and costs issues. ComPat was drafted by Eurocrats, yet killed by politicians, EPLA is drafted by technocrats. Will it also be killed by politicians?

If the supporters do a similar weak job in lobbying for the EPLA at political level as they did with the CII initiative and only ridicule the opponents, without a thorough and constructive debate, EPLA is doomed to fail. The only way to go forward is to have a sound and constructive discussion between those in favor and those opposed. Industry representatives should speak with one tongue, should discuss issues with the EPLA with SME representatives among each other in industry and other lobby organizations like UNICE and similar groups. They should undertake a joint effort to make EPLA even better, not to “double tongue”. Likewise, if the opponents continue to debate the way they have aired their views so far, there will be no progress and this great initiative will not fly. It would be a disaster for Europe’s innovation policy, we will not be able to have a effective answer to growing competition of China, we will be much less effective to challenge the Asian tigers than the Americans do and we will end up in a divided Europe, with patents not being used effectively for what they are created for: foster innovation.

Agreed, the relation between innovation and patents need to be (further) researched and updated. Policymakers need to be provided with academic and independent research into the relation between innovation and patents. In Europe we can learn from the way in which in the US that same debate on quality of patents and innovation is being held.

To be continued.