The United Kingdom: More than just banking

This article was included in our Summer 2010 edition of Inside IP magazine.

Background

The state of patent litigation in Europe has been well documented over the years, and widely accepted as being in need of repair. But compared to the scale of reform facing Europe, the root of the problem appears to be relatively simple.

The current European patent system allows the inventor to make a single application for patents in any or all of the European Patent Convention (EPC) member states. However, upon grant the patent is divided up into a collection of separate and individual national patents. As a result, the reality is that the concept of a single market for patents does not exist in Europe. Individual national patents can only be enforced by way of separate enforcement proceedings in the relevant member state, and of course, the procedure for this varies across different jurisdictions. This potentially gives rise to duplication of proceedings and conflicting judgments in different jurisdictions. It is therefore quite possible for one national patent out of the European bundle to be declared wholly or partially null and void while another is held to be valid. It is moreover not impossible that the scope of protection of one patent turns out to be different from that of another one. An excellent recent example of this is the ongoing litigation by Document Security Systems, Inc. relating to banknote security features, in which a DSS patent has been declared valid in Germany and The Netherlands, but held invalid in the UK, France and Belgium. The recent European Court of Justice cases have also confirmed that only the courts of the country of grant have jurisdiction to decide on the validity of a patent.  This effectively put an end to some European courts’ willingness to rule on the validity of a patent in an infringement action relating to a foreign patent.

In the circumstances, the only way to attack a patent on a consistent pan-European basis at present is by way of an opposition procedure (See The Commercial Litigation Journal, July/August 2009), but this option is not available indefinitely as it can only be initiated during the first nine months after grant.

Unified Patent Litigation System

Against this backdrop, a working party on patent litigation was set up in 1999 to propose a convention that would create a centralised judicial system for European patents. The working party published a draft for a European Patent Litigation Agreement (“EPLA”) in 2003, but the discussions eventually stalled because of objections to the creation of a new independent jurisdiction outside the European Community. The discussions were reopened by the European Commission in 2006 who recommended to the European Council the adoption of an agreement that would create a Unified Patent Litigation System (UPLS) and the latest version of the draft Agreement on the European and Community Patents court was published in March this year. At present however the European Court of Justice is considering whether the proposed European Patent Court system complies with the EC Treaty. At the same time, there have been suggestions that a political agreement may be reached in December 2009. All in all, despite the stalled discussions and the current economic climate, the general perception is that the Commission remains firmly committed to a comprehensive patent reform.

However, the challenge facing the Commission - the creation of a system that increases legal certainty and promotes consistent application and interpretation of European patent law – could not be more difficult. On top of this, the Commission is also aiming to reduce the costs of patent litigation by removing the need for multiple parallel litigations. Among other things, the Commission proposes establishing a court structure that has jurisdiction concerning the infringement and validity of European and Community patents. It hopes to achieve this through a single judiciary following uniform procedures and comprised of highly specialised judges whose decisions will have effect throughout the territories where the patent is in force.

The Future: UK perspective

There have been many commentaries and opinions written about the proposed UPLS but one aspect which seems to be often overlooked is the impact this would have on the individual member states. Questions must be asked on whether the UPLS, whilst being fair in principle, would bring about a fair distribution of patent litigation cases across Europe.

The creation of a single specialist court responsible for decisions on the European patents should increase legal certainty and promote a uniform application and interpretation of European patent law. The proposed UPLS also appears to address the issue of judicial arrangements, including concerns over non-specialist judges making decisions on highly technical subject matters, the role of the ECJ in the court system and the language. In addition, a single court is likely to reduce costs as it will remove the need for multiple parallel litigations. It should also be able to deliver litigation at a similar level of cost as the low-cost European national systems, such as Germany, France and The Netherlands. This is of course welcome news for any potential litigant, but is it really all good news for the future of patent litigation in the UK?

90% of EU patent litigation already takes place in the courts of four member states: Germany, France, the UK and the Netherlands. But for multinational companies, Germany is fast becoming the preferred jurisdiction for infringement actions. Indeed, over half (some estimate as many as 70%) of patent infringement actions brought in Europe are brought in Germany.

One could be forgiven for thinking that this is purely down to costs: UK actions tend to be more expensive than those in other member states. For example, the cost of a first-instance case in UK may range from €150,000 to €1 million. In Germany, however, the costs are expected to be around €50,000 to €150,000 at first instance.

This is correct to a certain extent, and the UPLS should help to bring down the costs in the high-cost jurisdictions like the UK. Its aim after all is to provide a level playing field and therefore it should not matter whether proceedings are brought in the UK or Germany. However, in practice, the playing field may not be so level if crucial non-legal factors are taken into account.

For example, a foreign patentee would normally first seek advice from the patent attorney who filed the patent in question. The patent attorney will of course prefer to work with lawyers within the same jurisdiction, and inevitably, the patentee’s decision on taking legal action will be largely affected by the location of the patent attorney.

In 2005, around 45% of the total European applications were submitted from German addresses. (Although no figures were available for the UK, it is unlikely to match that figure given that there are around 3,000 European patent attorneys based in Germany and around 1,800 in the UK.) Furthermore, although it is assumed that the UK probably receives most of the instructions from the US (language issue being the main reason), this should not be taken for granted as the figures tell a different story. It was reported that in 2005 close to half of the total applications from the US filed at the EPO were filed from German addresses. The figures in respect of applications from Japan are more discouraging - around two-thirds of applications from Japan were submitted from German addresses.

For a foreign company, there is also the general perception of a particular country. For instance, Japanese and Korean companies place great importance on this and are beginning to prefer Germany over other European countries simply for its reputation as an industrially focused country. Germany’s automotive and electronics companies have no doubt played a significant part in this, but at the same time, one senior figure at a major multinational company explained that the UK has also played a part in turning foreign companies away too. He explained that Germany has (whether by coincidence or through concerted effort) successfully managed to “brand” itself as a pro-engineering country, which is in contrast to what has been happening in the UK in recent years. The UK Government, and in particular London, has pushed hard to become the world’s financial hub. However, whilst doing so, the Government seemingly forgot about all other industries. It has also failed to provide the same level of support (both politically and financially) to other industries and it is therefore not surprising that out of all the European countries the UK has been hit the hardest by the recent credit crunch.

The UK has stood its ground well so far and will continue to play a significant role in European patent litigation. Of course, foreign companies are not the only source of patent litigation, but their significance and contribution should not be underestimated. It would be commercially ignorant of lawyers to simply assume that a multinational company with substantial funds would continue to prefer the UK simply for historic and language reasons. Once the UPLS is introduced, these companies may start to put greater importance on commercial and non-legal factors. We will have to see what the UK does to stop turning its back on foreign companies and patent litigation.

1. Case C-4/03 Gesellschaft für Antriebstechnik mbH & Co. KG (GAT) v. Lamellen und Kupplungsbau Beteiligungs KG (LuK); Case C-539/03 Roche Nederland BV and ors v. Drs Primus and Goldbenberg

Jae-Woo (Jae) Park 19 Nov 2009

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