Is there an After-Life for Pan European Injunctions?

I am sure you remember the good old days when Dutch patent practitioners introduced the “pan European injunctions”. Based on the idea that a European patent granted in Munich according to uniform (and unified) principles of patentability should enjoy pan-European protection by a single strike. The Dutch, not known for their shyness when it comes to introducing creative policies, introduced the idea of a “cross border” injunction, of course, to be rendered by Dutch courts. This was the early 90’s. The Dutch Supreme Court opened the cross border doors in its decision Lincoln/Interlas of 24 October 1993, published in NJ 1992/404). At least, that was what the originator of Europe’s Cross Border Practice, Willem Hoyng, advocated. He proposed to organize a mock trial, held in the dependence of the European Patent Office in Rijswijk (The Hague, Netherlands) for an audience of over 200 patent practitioners, opening the eyes of many to show that this was the solution to Europe’s lack in promoting a uniform patent enforcement strategy. In what became his “house style” advocacy Willem Hoyng defended that art 69[1] European Patent Convention provided for a stepping stone for a uniform interpretation of a EPO granted patent. Uniformly granted, according to unified principles of patentability, so what’s wrong in letting a Netherlands judge order an injunction Europe-wide on the basis of such unified principles?

The Cross Border Practice worked very well. For a while, that is. It did attract in the 90’s and early 2000 numerous –mostly US – companies to the Dutch courts, frustrated as they were by the slow pace of European patent integration and notoriously unpredictable outcomes (as the ones we still experience now, anno 2008, see our post on the ECB vs. DCC case).

All this ended with the outcome of legal scrutiny by the European Court of Justice. Two ECJ cases choked the breath out of Cross Border Relief, GAT vs. LUK and Primus/Roche. Blogger did argue the same, in IER (Netherlands Intellectual Property Monthly). Not so, Willem Hoyng, argues, disputatious as he (still) is:

"(…) We think that GAT-LUK and also the Dutch Supreme Court decision have to be interpreted in such a way that the court can deal with infringement questions as long as it does not rule on the validity. We conclude this from the fact that the court is competent to hear the infringement case and does not need to rule on validity in order to make a decision. This may certainly be the case where a defendant denies that he has committed infringement acts in certain or all countries. Furthermore, many technical non infringement arguments do not necessitate a ruling on validity (…)”

Curious why? Read his recent contribution to Netherlands’ well-known IP blog, boek9.nl.

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[1] "Article 69 should not be interpreted in the sense that the extent of the protection conferred by a European patent is to be understood as that defined by the strict, literal meaning of the wording used in the claims, the description and drawings being employed only for the purpose of resolving an ambiguity found in the claims. Neither should it be interpreted in the sense that the claims serve only as a guideline and that the actual protection conferred may extend to what, from a consideration of the description and drawings by a person skilled in the art, the patentee has contemplated. On the contrary, it is to be interpreted as defining a position between these extremes which combines a fair protection for the patentee with a reasonable degree of certainty for third parties."

Europe’s Patent Demise

You are a European institution, the European Central Bank, and you seek the invalidation of what has been granted as a valid right by another European institution, the European Patent Office (EPO). The last weeks we got a taste of how The Great Patent Divide, the most un-European experience in patent law, has turned into Europe's Patent Demise.

Threatened by an patent infringement claim of a US company, Document Security Systems, Inc. (DSS) the ECB seeks the invalidation in several European countries. The UK patents court (in first instance) invalidates the patent, EP 0455 750 B1 for a ‘Method of making a nonreplicable document’ on March 26, 2007. A day later the German Federal Patent Court ("BundesPatentGericht") disagrees with the UK court and finds the patent valid. By judgment of March 12, 2008 the District Court in The Hague, Netherlands, upheld the patent as valid and follows Germany. Just a few weeks earlier, on 9th January 2008, the French court ("Tribunal de Grande Instance de Paris") agreed with the UK court in first instance and distances itself from the German court and found the patent invalid.

On March 19, 2008, the UK Appeal Court affirmed the invalidity findings of its first instance colleagues. Patent dead, in the UK and France (so far, appeal in France still pending).

You still with me?

What a disgrace. What a sorry state European patent law is in. We know that Europe is lacking a European view on validity (and infringement for that matter), but how can this be explained? The view, generally held, is that UK courts are (very) critical on what comes out of the European Patent Office. Patent 0455750 should not have been granted, if it were for the UK. France, not yet known as “patent-unfriendly” has chosen the side of the UK in this case. Is this a scary sign of what is there to come? Maybe (just) an incident and no forbode of what is next (France as the next patent basher)? One begins to wonder, are the Germans more fond of what comes out of their (“own”) EPO, located in Munich? Is Holland more inclined to accept what comes out of Munich as well? Or is this all “coincidence”? We think not. We have seen this divide before (on stents: Angiotech's patent for Taxus stent revoked by UK Court of Appeal, (partially) upheld by the Dutch District Court, but then it was only for Germany & Holland versus the UK. Is France now joining the chorus of “we-know-it-all-better-than-the-EPO” ?

(see also Dennis Crouch' Patently-O blog)

How justified are differences in IP duration?

Ever thought about the reasons why copyright protégés have been able to extend the duration of the copyright law in many countries now to 70 years after the death of the author while patents are lagging behind? Why can’t get patent owners more than a scanty 20 year legal protection after the date of filing while their copyright counterpart enjoy the law’s protection for more than three times longer? It crossed my mind re-reading the European Court’s September 2007 judgment in Merck Genericos vs. Merck. The case was about a provision in the Portuguese patent law maximizing patent protection to 15 years rather than 20 years, as is provided for in art. 33 of the TRIPs Agreement. The issue then was whether this article has “direct effect” in national (in casu Portuguese) law and can be applied directly by a national court. The Court held that as patent law in Europe, although in many ways uniformed, is still not “community law”, national courts can choose whether or not to give direct effect to that provision.

So a patchwork on terms for duration of intellectual property rights exist, not only between IPRs (copyright vs. patent protection) but also within IPRs (patent laws in different countries). Intellectual property right being an economic property right there are no doubt economic reasons to justify the difference. Take copyright law: an extended term of protection may generate twenty more years of commercial revenue for many economically viable works. Driven by US lawmakers and lobbyists, its not hard to see why. Much of US revenue may come from foreign countries where many novels, motion pictures, and other U.S. works find a market. The economic argument translates not only into greater revenues for U.S. copyright holders, but also into the subsequent tax revenues, employment prospects, and shareholder profits that accompany expanded business. First Monday, a “peer-reviewed journal on the internet”, cites Prof. Crews[1] in that if those revenues are derived from foreign markets, the strengthened protection and longer term of protection for copyrights may also help shift the balance of international trade in favor of the US.

In contrast to the economic and domestically pragmatic arguments, prof. Crews sees several respects in which strengthened IPRS do not include a corresponding balance of the public interest. Recognizing that, in its origins, copyright law was intended to achieve a balance between preserving a public domain or commons of ideas and providing incentive for creative endeavors, he suggests the former is neglected in the trend toward maximizing duration terms of IPRS.

Why then is the copyright term so much longer than for patents? How “limited” should the duration be to effectuate the appropriate balance between reward to authors and inventors and the public domain? Traditionally benefits for longer copyright protection have been defended by arguing that this would enhance incentives for authors and artists to create. But why would that be different with technological innovations? I would rather argue the opposite. Many innovations would deserve a much longer duration of protection than some literary works. Why would the inventor of a now widely used technology, the first practical visible-spectrum LED (Light Emitting Diode, the bright screen in many electronics products) Nick Holonyak, Jr of General Electric, see his invention of 1962 long run out of patent protection, while had he copyright, would have still enjoyed his legal privilege?

[1] K.D. CREWS, Harmonization and the Goals of Copyright: Property Rights or Cultural Progress? in 6 Ind. J. of Global Legal Studies, 1998, 117 ff.

New chapter in UK saga of patenting computer programs

There has been another development in the continuing saga of the UK's interpretation of what is and is not patentable subject matter in relation to computer programs.

In Symbian's Patent Application (Patents Court, 18 March 2008), Patten J overturned a decision of the UK-IPO to refuse a patent application because it related to nothing more than a computer program. In his judgment Patten J observed that the UK-IPO's decision illustrates the divide which exists between the UK-IPO and the EPO about how the patentability of inventions involving computer programs is assessed. The equivalent patent has been granted by the EPO. The UK-IPO announced that it will appeal the decision.

Background
The UK-IPO's interpretation of what was patentable was relaxed slightly following Kitchin J's judgment in Astron Clinica. A new Practice Note was published on 7 February 2008 to supplement the Practice Note of 2 November 2006 (which had been published subsequent to the Court of Appeal's decision in Aerotel/Macrossan).

The Symbian decision
The UK-IPO considers that Patten J did not apply the Aerotel/Macrossan test in the way intended by the Court of Appeal and that this has created uncertainty about how the Aerotel/Macrossan test should be applied when deciding whether a computer implemented invention is patentable.

Pending the result of its appeal, the UK-IPO will be continuing to follow the the Aerotel vs. Macrossan test set out in its Practice Notices of November 2006 and February 2008. However, it will take account of the Symbian judgment "in appropriate cases".

Hopefully the appeal will provide the opportunity for an authoritative Court of Appeal decision one way or another. The present uncertainty and the difference in approach betwwen the EPO and the UK-IPO is clearly unsatisfactory. However, while apparently contradictory decisions of the EPO Boards of Appeal exist, confusion is bound to remain.

There have been some reports that Alison Brimelow, the (relatively) new President of the EPO has indicated that the EPO might refer the issue of Article 52(2) exclusions to the Enlarged Board of Appeal. Jacob LJ floated this as a desirable development in his Aerotel/Macrossan judgment but Alain Pompidou, the previous president, rejected it "at this stage". Nothing may come of this (and Ms Brimelow may even have been misquoted) but an authoritative Enlarged Board of Appeal decision would be welcome too.

Peter Hill, Simmons & Simmons (London)

IP-Com extends its patent reach towards HTC in Germany

In our blog: “Do Not Blame Patent Trolls” of February 2, we touched upon a new player in the patent arena in Europe, IP-Com in Germany. Since then the debate has heated up whether NPEs (Non Practicing Entities) have reached Europe. They did (actually a while ago). In a Dow Jones Newswire, hot from the press, Stuart Weinberg reports on the background of the patents IP-Com bought from Bosch to subsequently assert those against Nokia in a German court.

Just very recently HTC, a major Taiwanese player on the electronics market in Europe became the next target of Europe’s latest addition to the family of NPEs, IP-Com, attacking HTC’s mobile communications handhelds. IP-Com (from Munich) obtained from the Frankfurt court a preliminary injunction (“Einstweilige Verfügung”) against HTC. This is an ex parte court order obtained without hearing HTC. Next week HTC will get its chance in the District Court (Landesgericht) Frankfurt opposing this injunction.

It’s a déjà vu. In our blog “Sisvel brings Patent Wild West into Germany” we commented about previous tactics another NPE used in getting SanDisk on their knees. IP-Com opts for the a more common approach, using the possibility to obtain a preliminary injunction. Germany used to be one of the few countries where an ex parte injunction, even in complex patent cases, could be obtained. No longer so. Since the enactment in most EU laws of the European Directive 2004/48 of 30 April 2004 on Enforcement of Intellectual Property Rights[1], every EU country has the possibility to obtain such ex parte injunctions. The idea behind is that those injunctions were needed to fight against counterfeit and would commonly be used against imports of counterfeit consumer goods, not in patent disputes. The reason being that patent cases are usually about either defending market share or obtaining license fees from an unwilling party. In the former case an injunction is a possibility. In the latter case this is rare, mostly granted only when there is a serious risk that the alleged infringer can’t pay any royalty or damage the patent holder may occur once the injunction is being upheld. In this respect the comment of Ray Niro in the Dow Jones newswire -("Germany may actually have a more enlightened view of the need for injunctive relief when patents are being violated than we do”) is mostly misconceived.

** Only a few courts in Germany tend to allow preliminary injunctions more easily then others. These German “rocket docket” courts are not the ones that do the bulk of the patent cases (being concentrated in Hamburg, Düsseldorf and München)

** As a flip side, these courts do that because they have provide a fast remedy against any such ex parte injunctions as the alleged infringer and “victim” of the injunction can ask the court to stay the injunction pending a hearing they request where their side of the story can be heard. This happens fairly quickly after the injunction is being given. Only then the court hears the full story by both parties and can either upheld or lift the injunction.

** Ex parte injunctions are allowed in any European jurisdiction after the Enforcement Directive. However, UK, France and Netherlands are very difficult to get a preliminary injunction in somewhat complex patent cases. Netherlands’ courts still are very reluctant to provide those types of preliminary injunctions as they have other fast alternatives like the well known “kort geding” (where even in patent cases a preliminary injunction can be given in 6-8 weeks). Ex parte injunctions in patent cases have not been granted, as far as we know, in The Netherlands, nor in any other EU country.

So any suggestion that Germany is a better place for NPE to litigate can not be based upon a tactical advantage of a preliminary injunction. So why would NPEs choose Germany? Firstly because unlike UK patent judges, German courts are generally more friendly on EP patents that come out of the EPO. Germany as the only EU country also has the system of bifurcation (validity and infringement are being dealt with by different courts in Germany), all of which helps the NPE as a patent owner.

[1] See “Summary of the Implementation of Directive 2004/48 on the Enforcement of IPRs in EU member States as per October 2006”) on the right side of the ipeg blog, under “Patent, Innovation and R&D documentation”

Qualcomm vs. Nokia UK judgement

Today, the UK court (Mr. Justice Floyd) rendered its decision in the Qualcomm vs Nokia case. The case in the UK is slightly different than similar fights that take place in Netherlands and Germany in that Qualcomm is suing Nokia in the UK under 2 patents (EP 0,629,324 and EP 0,695,482) both related to power control. European Patent 0,629,324 (“’324”) relates to an apparatus for controlling the way in which the mobile telephone reduces power consumption by monitoring a channel for incoming messages intermittently. The second, European Patent 0,695,482 (“ ’482”) relates to a method and device for the correction and limitation of the transmitted power of a mobile telephone.

Qualcomm’s claim under ‘324 is limited to contributory infringement as the product claims require both a handset and a base station. Qualcomm also sought a declaration of essentiality in respect of ‘324 re the 3G standard.

As to ‘482 the UK court comes to the conclusion that Qualcomm’s patent ‘482 is invalid. Had the patent been valid, Qualcomm would have established infringement by Nokia of claims 1, 2 and 9. Although essentiality did not form part of this litigation as yet, the court ruled in an obiter dictum:

(…) Essential is defined in the ETSI IPR Policy[1] document as follows:

“ESSENTIAL” as applied to IPR means that it is not possible on technical (but not commercial) grounds, taking into account normal technical practice and the state of the art generally available at the time of standardization, to make, sell, lease, otherwise dispose of, repair, use or operate EQUIPMENT or METHODS which comply with a STANDARD without infringing that IPR. For the avoidance of doubt in exceptional cases where a STANDARD can only be implemented by technical solutions, all of which are infringement of IPRs, all such IPRs shall be considered ESSENTIAL.”

The Court preludes to non esentiality in finding that the ‘482 Patent would not, if valid, be “technically essential”

“ ‘482 claims a specific circuit for and method of using a combination
of open and closed loop power control commands. Whilst the standard
requires the phone to be capable of using both types of power control, it is
silent on how to implement its requirements. For example it does not
specify calibration, far less how calibration is to be achieved. The
evidence also established (see for example document X21) that there were other
ways of achieving this objective. I was not satisfied that these were not
technically possible.

The overall findings of the court, are:

*** Qualcomm patent ‘324 is invalid as granted for lack of novelty over two prior art publications (“Cognito” and “Nippon Telegraph”) and obviousness over another prior art document (“NEC”). Qualcomm submitted during trial that it could amend the claims, but that does not help either. The patent would remain invalid as proposed to be amended, for lack of novelty over Cognito and obviousness over NEC, the Court found. As a Dutch comfort for Qualcomm (for what it is worth) ‘324 would, if valid, be infringed by GSM/GPRS in combination with Nokia’s phones.

*** Qualcomm patent ‘482 (that is, claims 1, 2, 9 and 11) are invalid for lack of inventive step over three other prior art documents (“IS-95”, publications relating to patents of Mr. Wheatley, an inventor and “Soliman”, and claims 9 and 11 for insufficiency. Again, Dutch comfort, as the Court held that, had the Qualcomm patent been held valid, Nokia would have infringed claims 1, 2 and 9, but, at the same token, had Qualcomm’s patent been held valid the court would not have found it to be “essential” to the standard.

[1] paragraph 15 of the ETSI IPR Policy (blogger), the first part of the cited sentence I could find in the ETSI document, not the second sentence

IP Valuation - A Pandora's Box

Two European trademark blogs, MarkenBlog and Class 46 referred to a publication in Germany’s business newspaper Handelsblatt on the effect of the proposed new "Bilanzrichtlinien modernisierungs gesetz” (Accounting Directives Modernizations Law). According to the two blogs this introduces new accounting rules for small and medium sized companies how and when to report development costs of their intellectual property on their corporate balance sheet.

As we all know valuation of IP is always the biggest stumbling block in deals where patents are either sold, licensed or securitized. Most intangible assets generate premium returns for the business that owns them, either through an increase in revenues or through a reduction in costs. It’s the subject where a multiple companies make their money, adding to the confusion. There over a 100 different methods of valuating intellectual property and it’s no wonder that many don’t see the wood for the trees anymore.

Different compelling arguments have been advanced for a better understanding and appreciation of the value of IP and its potential impact on business value. Intangible assets (patents, marks, know-how, licenses..) play increasingly a key factor for firms’ economic performance. They are particularly important for early stage-technology based companies as IP is viewed as the primary contribution to earning power and future value.

And of course, not only are there accountants, IP valuators, IP management companies but also lawyers seeking revenues from their own, proprietary methods of valuating patents[1], some seek proprietary gains from patenting their own valuation method (see patent application WO/2005/019964 for a “System and method of Valuation of Intellectual Property".

More than ever there is a dire need to coordinate global efforts to “standardize” the valuation methodology as this is one of the major impediments to increase the value and tradeability of intellectual assets.

The Canadian Institute of Chartered Accountants, provided updates on the Global Reporting Initiative in 2006 mentioned several topics to be dealt with in achieving such “standardization” are:

** The challenge that intellectual capital creates for accounting;
** Possible responses to this challenge – why the "intangibles approach" is of questionable value; ** Restating the challenge to accounting;
** Proposals to the international accounting community

The German Institute for Industry Standards (Deutsches Institut für Normung e.V) is working on a standard for patent valuation (“Grundsätze ordnungsgemäßer Patentbewertung”) together with Steinbeis in Hamburg, whereas banks are working on a standard to valuate IP for financing purposes. None of these initiatives have led to a worldwide standard yet.

It can be doubted whether the final rescue will come from accountants, as the IASB (International Accounting Standards Board) who contemplated to undertake an active project on intangible assets (that is, excluding goodwill) jointly with the FASB in December 2007, was rejected, stating “that properly addressing the accounting for intangible assets would impose a large demand on the Board’s limited resources.”

So who’s going to take the lead? We expect this to be the ISO (International Organization for Standardization) after DIN submitted its standard proposal in December 2007.

Interesting resources on developments in standardizing accounting and valuation principles of intangibles assets, or intellectual capital:
** Intellectual Capital Forum
** IHS: ANSI Seeks Comments on Proposal for ISO Work Item on Patent Valuation
[1] See for a very interesting interview with Baruch Lev on this subject: “Interview with Baruch Lev: Accounting, Reporting and Intangible Assets”