30 January 2007

UK and Dutch Court differ on validity of stents patent

On January 16th the UK Court of Appeal in Angiotech Pharm., Inc. v. Conor MedSystems Inc., [2007] EWCA Civ 5 (Jacob, L.J.) affirmed an invalidity ruling of critical claim 12 of Angiotech’s patent [2006] EWHC 260 (Pat) (Pumfrey, J.), while the very next day - in counterpart litigation – the The Hague District Court in The Netherlands upheld the same claim in Conor MedSystems Inc. v. Angiotech Pharm., Inc., No. 258022/HA ZA 06-261 (judgment January 17, 2007).

The patent is about taxol as the factor to be used in a drug eluting stent. Angiotech Pharmaceuticals Inc. is the owner together with the University of British Columbia of European patent 0706376 (or “Hunter”). Boston Scientific Corporation is the licensee in the field of the cardiovascular medicine under EP 376.

Beyond providing a comparative study of obviousness on counterpart patents where both courts were obviously aware of the progress of both actions, the British decision from one of the leading common law patent jurists provides an interesting comparative framework for the soon to be decided U.S. Supreme Court KSR decision which may occur in the February session of the Court that commences February 20, 2007.

The British decision makes special note of the counterpart Dutch proceedings and an earlier Dutch decision involving different parties. See ¶ 65- ¶ 68 (pp. 24-25). Lord Justice Jacob made the following observation:

“One can, of course, postulate a different policy under which a [patent] monopoly might make sense. There are old or obvious ideas which take a lot of work, expense and time to develop and turn into something practical and successful. Without the incentive of a monopoly, people may not do that work or spend the time and money. The Fosamax case, Teva v Gentili [2003] EWHC 5 (Patent), [2003] EWCA Civ 1545, is an example of an obvious invention which cost lots to bring to market. But patent law provided no protection for all that investment because the basic invention was obvious. The courts’ job is not, however, to uphold any claim to a monopoly for an idea which requires investment and risk to bring to market, only those for ideas which are new, non-obvious and enabled.”

The British opinion also has an extensive discussion of the law of obviousness, particularly beginning at ¶ 39-¶ 60 (pp. 18-23), including extensive comparative law discussions with a quotation from Circuit Judge Rich:

“Slight reflection suggests, we think, that there is usually an element of
‘obviousness to try’ in any research endeavour that is not undertaken with
complete blindness but rather with some semblance of a chance of success, and
that patentability determinations based on that as the test would not only be
contrary to statute but result in a marked deterioration of the whole patent
system as an incentive to invest in those efforts and attempts which go by the
name of ‘research’.”

Prof. Hal Wegner, Washington D.C

28 January 2007

Patent prosecution file history can be used in infringement case

On December 22, 2006 the Dutch Supreme Court ruled in the case Dijkstra vs. Saier that the patent prosecution file history may be invoked to prevent the patentee disclaiming an aspect of his patent monopoly in order to get a patent granted, but then reclaiming it during infringement proceedings. In Anglo American practice this is known as file wrapper estoppel, “amendment estoppel”, or “argument estoppel”. This prevents a proprietor who has narrowed his claims during prosecution in order to meet requirements of patentability from then asserting the patent against any equivalent technologies falling within the scope of a surrendered territory. The latter type of estoppel (“argument estoppel”), is similar as amendment estoppel, in that where a patentee has made statements to the Patent Office (or in the Dijksta vs. Saier case) during prosecution - namely during the opposition proceedings before the European Patent Office - with regard to the scope of a claim, he cannot subsequently assert the patent against equivalent technology in contradiction of that assertion.

The Court thus affirmed its findings in the first case on the use of prosecution file history in a patent infringement case, Ciba-Geigy vs. Oté Optics (NJ 1995/391). In that case the Dutch Supreme Court ruled that the scope of protection of a patent has to be ascertained by considering four factors: (1) in interpreting the terms of the claims, the Court is to determine the essence of the invention; in other words, consider the inventive concept behind the wording of the claims; (2) this interpretation then needs to be corrected to give a reasonable degree of certainty for third parties, which may sometimes justify a restricted, literal interpretation of the wording of the claims; (3) the skilled person may - with restraint - use the prosecution history file for the purpose of claim interpretation; (4) and all other circumstances of the case are to be taken into account, including the possible 'breakthrough' nature of an invention (justifying a broader scope). When considering factors (2) and (3), poor drafting of the patent may be construed to be patentee's disadvantage. In subsequent decisions (including Impro vs. Liko, rendered three weeks after Amgen in the UK), the Netherlands Supreme Court has expressly confirmed this approach. The approach certainly appears to be more in line with the EPC requirements, although there is a lingering feeling amongst practitioners that, underlying the approach, the Supreme Court still continues to embrace its ‘essence of the invention’ approach.

In Van Bentum vs. Kool (HR 29 maart 2002, NJ 2002/530 m nt. ChG), a clear case of non-literal infringement, the Supreme Court has clarified the approach in Ciba-Geigy vs. Oté Optics such that the skilled person is only to assume that the patentee has surrendered part of the protection (e.g. beyond the literal wording of the claims but within the full extent of the invention) if there is ‘proper ground’ for the skilled person to do so. Such “proper ground” can for example be found in the patent description or the prosecution history file. This was confirmed in the case Impro vs. Liko, HR 12 November 2004, NJ 2004, 674).

10 January 2007

The MedImmune US Supreme Court decision and European implications

Every once in a while this blog pays attention to patent cases outside Europe, if there is an impact for Europe and European patent pratise.

Surely this is the case for the decision by the US Supreme in MedImmune, Inc. v. Genentech, Inc., No. 05-608, U.S. (2007) (Scalia, J.). The issues at stake is whether a patent can be challenged by a licensee even after taking a license under that same license. The question is whether certain US law provisions require a patent licensee to terminate or be in breach of its licenseagreement before it can seek a declaratory judgment that the underlying patent is invalid, unenforceable, or not infringed.

Many jurisdictions in Europe, among which Germany, take the view that if and someone takes a license under a patent he cannot have it both ways: buying peace and freedom from suit under the patent he takes a license under and at the same time challenge the validity. In Europe, a clause in a license agreement outright forbidding the licensee to challenge the validity is a no-go under current competition law. However, challenging the patent by the licensee, even after taking a license, gives the licensor the right to terminate the license. By allowing this termination practise by German courts, the practical result is that no licensee who has "bought patent peace" will be able to effectively challenge the patent after taking the license. To me this seems much like the situation under the "old" US law, as developped by the Court of Appeal for the Federal Circuit ("CAFC"), the Federal appeals court for patents in the US. It also gives rise to the question how effective the anti competion porvision is that a no-challenge clause is illegal under EU competition law if practically the licensor can achieve this result by simply terminating the license agreement after the licensee has taken up the gauntlets against the licensor.

Interesting is Prof Hal Wegner's comments and summary on this recent decision, as can be seen in his post, as can be found on this blog under "US Patent Law Updates by Hal Wegner" (on the right side of this blog under "IP Presentations").

See also:
Lynn E. Eccleston, "MedImmune: The Practical Implications"

09 January 2007

Patents and Innovation, What We Learn From History

This is the text of a lecture given by Severin de Wit on the occasion of DSM SPECIAL INVENTION REWARD 2006 on January 9, 2007 at Huis van de Toekomst in Rosmalen, Netherlands.

I am grateful to be able to witness today the grant of the DSM Special Invention Reward. This prestigious award is given to select DSM researchers whose exceptional scientific achievements have been patented and have created a distinct line of business for DSM. DSM’s most prestigious inventions and its creators are being celebrated today. It seems to me that an appropriate topic for today’s festivities is to take you back for a moment in history to show the relationship between patents and innovation. Let us see what we can learn for tomorrow what happened yesterday.

This is the time of the year that we can read about inventions that top the list of imaginary innovations, the best of the best – like TIME’s “Best Inventions 2006”, where YouTube appears as top invention of 2006, as well as hypoallergenic cats, a hydrogen bomber and a new way of drying your wet umbrella.

When people think of innovations they fantasize about tourism to Mars, immortality in a bottle, or a smarter internet. In fact the best innovations of all times are those that take into account to what degree inventions are actually used by people. As David Edgerton points out in his newly published book: “The Shock of the Old”, corrugated iron is as revolutionary an invention as is the microchip, as this light durable and easily worked building material is used for walls, roofs and even to collect rainwater, patented in 1829 to shelter goods waiting in London’s harbor. It became a global technology, changing our lives more dramatically than the hot new ones.

So let us explore history to see what innovations and patents have to do with each other and what lessons can be learned from it. After the American Revolutionary War with Britain, many of the English traditions remained in the hearts and minds of the Americans. One of those fundamental notions was that patent protection encouraged innovation. By the late 1700s, Britain had the longest continuous patent protection in the world, tracking back to 1449 when Henry VI issued John of Utynam a letter patent granting this Flemish glassmaker a twenty year monopoly on the process that produced the colored glass windows at Eaton College.

After American’s Independence, creating a working system of patents was a top priority for the first American President, George Washington. In his first State of the Union on January 8, 1790, he recommended Congress to enact legislation to encourage the introduction of new inventions from abroad and foster their creation domestically. Congress acted quickly and enacted the first Patent Act in April of that same year.

The Patent Act made issuance of a patent a matter of the highest importance. There was no Patent Office. Rather the issuing of patents was handled by the President, George Washington, and three senior cabinet officials, Secretary of State, Thomas Jefferson, Secretary of War Henry Knox and Attorney General Edmund Randolph. They met on the last Saturday of every month to review patent applications. If two of the three approved, a patent letter was prepared for the personal signature of George Washington.

Jefferson was surprised by the number of innovations inspired by the first patent act. More inventions were submitted than the three member Board could handle. The first patent act had a false start: too many inventors hated the system as long delays were faced before their inventions became patented. Furthermore it was very hard to get a patent: for every one patent granted, one was denied.

A new patent system had to be more flexible than the first 1790 Act. What emerged was the Patent Act of 1836, eventually the foundation of the modern patent system, with an appointed Commissioner of Patents as well as a major library of scientific works. The new Law marked a major divide in economic history. It unleashed a major innovative wave of breakthrough inventions among which

· 1837: Thomas Davenport with an electric motor that could power shop machinery, thus creating power tools.

· 1844: Charles Goodyear was granted a patent on a process for “vulcanizing” rubber, creating a pliable material unaffected by temperature.

· 1854: Elisha Graves Otis demonstrated at the Crystal Palace Hotel in New York his new safety braking system for elevators, basically introducing the first safe elevator and by doing so transformed urban design worldwide

Major innovations at the time changed life dramatically and created whole new industries, not know by men before. However it came to a huge price, either because famous inventors had to fight to get their patent rewarded and enforced, or they were too greedy and convinced of the strength of their inventions that they failed to share at reasonable prices.

We all know Samuel Morse, a portrait painter and professor of literature of art at NY University. Here you see Morse's colored sketch of railway telegraph, ca. 1838. He conceived the first practical telegraph, helping to shape what became a completely new communications industry. Morse filed his patent application in 1838, got a patent two years later. On May 11 1844 he wired from a chamber of the US Supreme Court to a small group in Baltimore the now famous message – chosen by the daughter of the US Commissioner of Patents – “what hath God Wrought”. Although he spent years in litigation over patents, he was eventually rewarded for his efforts and was prosperous in his later years.

However, as history also shows, a great innovation leading to a useful patent in itself does not always do the job. One of the best examples is the story of Eli Whitney and some of his best known innovations: the cotton gin. He came to his invention basically by accident. He was invited to become a tutor for a wealthy South Carolina plantation owner. On his arrival in Savannah, he was casually confronted with a major problem of that period.

The green cotton they were raising had short strands with seeds firmly attached to the fiber. The fiber was valuable but only without the seeds. All plantation owners and major cotton producers faced a major, insolvable problem. The cotton plant was easy to grow and easy to harvest but the fiber was difficult to separate from the seeds. Whitney – who had never seen cotton in his life – was captivated by the land owners request to try to come with something innovative. Whitney eventually came with what is known as a “gin”. The gin was easy to make and caused the southern agricultural states to see its fortune changing overnight to become one of the richest areas in the whole country.

Whitney got his patent in 1794. What Whitney and his former host and now commercial benefactor, Miller, did not realize at the time was that smart licensing of a good invention brings a lot more gain than trying to own all the cotton gins, something that is very familiar in our age, but then again we have learned the advantages of an “open innovation”. Whitney and Miller’s charged high prices for anyone who wanted to use the invention. Because of the too high a price, competing cottoners copied Whitney’s product. Whitney found out the hard way that those who invent something valuable are destined to a life in court, particularly when the patent laws are weak and vague. Whitney had to fight in court to get his patent validated, which led him to say: “An invention can be so valuable as to be worthless to the inventor”. He found out the hard way that marketing and licensing the patent is as valuable to an invention as the invention itself.

Another lesson to be learned from history is that a successful innovation needs a fertile corporate environment and vision by business people who believe in the invention to make it a success.

Alexander Graham Bell was granted a patent that recognized him as the sole inventor of the telephone, US patent no. 174,465, eventually became known as “the single most valuable patent ever issued in the history of the world”. What is lesser known is that Bell brought his invention to Gardiner G. Hubbard, a prominent Boston attorney and entrepreneur. Hubbard helped Bell in finding practical business and political advice, understood wire communications and what it meant politically at that time. Hubbard got what Bell did not have to build the greatest telecommunications monopoly of its time: money, political connections, and above all business experience. Even after Bell was awarded his patent, few people immediately recognized its potential.

Hubbard also gave Bell the opportunity to show his telephone on a major exhibition, the 1876 Centennial Exposition in Philadelphia. Bell allowed Hubbard to make the appropriate arrangements for ownership of the patent and creation of a new company to develop it. Hubbard organized a trust that issued 5,000 shares of stock. Bell shared the stock with Thomas Watson, his assistant, Hubbard, and Thomas Sanders, another key figure making his invention to become a business success, the Bell Telephone Company.

So what are the lessons learned from history?
· That innovation cannot foster without legal protection from sound patent laws.
· That great innovations need fertile and sound business environments.
· That groundbreaking inventions need clever enforcement strategies by people familiar with the intellectual property workings. Whitney learned the hard way that clever licensing can enhance the prospects of the invention, trying to be exclusionary and greedy can be disastrous.

So far we have seen what great innovations have done for welfare and our well-being. Whitney, Morse and Bell would not have reached their fame without the grant of a patent. However neither an invention alone, nor the sole working of a patent can achieve great business success. Neither can do without the other.

The importance of intellectual property is often underestimated. Like Whitney, Bell and Morse learned their lessons, the 21st century will prove that those that are best equipped by smart intellectual property strategies will be the next generation winners in a time of global challenges by low costs manufacturing countries, like China and India. Let me briefly explain.

My favorite question to students at the RSM is: Why do you think that President Bush when visiting China, always has intellectual property at the top of his agenda?

The most instinctive response is that this is under pressure from the fashion, food and consumer electronics industry. Sure, Louis Vuitton deserves to be protected against piracy of its designs. But could Bush not leave this to Chirac? The real story is that policymakers have come to the conclusion that intellectual property and most notably patents, are the best protection against the low manufacturing threat from China and India. China’s position as the “world’s workshop” is based on a significant advantage with regard to manufacturing cost. Generally, one could say that the west has lost the manufacturing game. Chinese made products compete with European and American products on the respective markets.Although much of China’s current production of technology based products is still originating from the west outsourcing manufacturing, many Chinese operators are leaving the OEM model behind and start introducing their products under their own brands in western markets. Traditionally, the influx of cheap products has been countered by safeguards and anti-dumping duties, but these instruments and their application are restricted by WTO agreements. Although they temporarily can reduce the difference in price between local made and foreign products, they do not resolve the difference in the long run. Western economies are knowledge based. There is a long tradition of transforming R&D efforts into patents. This is different in China. Accordingly, in many tech sectors, Chinese companies who want to enter the western market need to license-in technology for their products. The royalties payable under such agreements can significantly increase the basic cost of such products. This reduces the competitive advantage for Chinese exporters which currently mostly is based on lower manufacturing cost. And that provides interesting possibilities to regulate the influx of Chinese products.

So the outlook may well be that patents and standards are taking over the role of traditional trade regulation instruments. This gives a new and challenging meaning to patents as a powerful tool against cheap Chinese imports.

DSM encountered this problem before when DSM Dyneema, the was faced with a threat against its strong ultrahigh molecular weight polyethylene Dyneema®, and used their patent against Hangzhou Pivot International Co Ltd of Hangzhou, in France to stop the Chinese. This is not merely a matter of asserting IP. It is a public policy issue to use Western knowledge based intellectual property to raise the bar for Chinese to enter the European and US market. For that same reason Europe introduced its own system of EU border protection by mirroring the US International Trade Commission’s powers to stop goods from being imported in the EU by using patents for Customs to be able to halt importation.

For companies like DSM there is therefore more to intellectual property and patents than a reward for R&D investments. It becomes a public policy instrument capable of leveraging power on the world market. That’s why Bush has IP on its top priority list. That is also why innovative companies like DSM will make intellectual property a key corporate policy issue.

And for a company like DSM what can it achieve in this new IP policy game if it has no access to talented inventors who will eventually enable it to play this economic power play on the world markets. DSM has shown what innovative spirit and a clever IP can achieve. And that is what we celebrate today.

sources: Pat Choate, “Hot Property, The stealing of Ideas in an Age of Globalization”¸ New York Alfred A. Knopf (2005), Newsweek, “Invention, Slow and Steady”, January 8, 2007, David Edgerton, “The Shock of the Old”, January 2007