The Unified Patent Court: options and tactics

Written on 8 Jun 2016

As a multi-national court, covering jurisdictions with quite different national laws and approaches to dispute resolution, the UPC has a high degree of flexibility.  As a result, there is significant scope for those bringing or defending a claim to make best use of the available options for tactical reasons.

Who can bring a claim?

Either the patentee or their exclusive licensee has standing to sue for infringement in the UPC.

If an exclusive licensee brings proceedings, the patentee is entitled to (but, contrary to English position, does not have to) be made a party.  If the patentee is not a party, then the defendant cannot contest validity in the infringement action; it has to bring separate action against the proprietor (Article 47 UPC Agreement).

This provides an interesting strategic option for bringing an infringement action without direct risk of having the patent invalidated.  If necessary (and after considering the tax implications) an exclusive licence could even be granted to a local entity specifically for the purpose of enforcement.

Which defendant to bring an action against

The choice (if there is one) of defendant may enable a claimant to force the action into a particular local division of its choice by selecting which member or members of a group of companies to sue.  This will depend on the corporate structure of the group and the organisation of its business; whether it has local subsidiaries or operates through distributorship agreements, for instance.

Conversely, if it is desirable to sue an overseas company which is not infringing, for tactical reasons, then it may be necessary to choose a forum where the local law includes a concept of joint tortfeasorship which will permit joinder.

Which patent(s) to invoke?

Not all patents can be invoked in UPC proceedings.  If the patent has already been opted out, then the national courts have exclusive jurisdiction unless or until it is opted in again.  Once the patent is the subject of an action in any Contracting State’s national court, then it cannot be opted in.  Conversely, once any action on a patent has been filed in the UPC, then the patent can no longer be opted out.

Subject to those constraints, two issues arise in considering the choice of patent for infringement proceedings in the UPC:

First, there may be evidential advantages in choosing a process patent, since the burden of proof for products made by patented processes is reversed (Article 55 UPC Agreement) if the patentee can show either that:

  • the infringing product is an identical product; or
  • there is a substantial likelihood that the infringing product was made by the patented process and the patentee has not been able to find out how it was made.   

The substantive law of the Unitary Patent is also broader than many national laws on infringement of process patents.  There is no requirement that an offer for use of a patented process must have been made in or directed to the country of protection. This increases the patentee’s range of choices of forum.

Second, the choice of patent may depend on whether the patentee is seeking a final injunction. The UPC Agreement is remarkably brief on the question of final injunctions, including merely a statement that the Court may grant them.  There is no guidance on the factors to be considered.  This leaves open the question of whether or not injunctions will be available in respect of patents declared essential to a technical standard and therefore subject to any form of FRAND-licensing commitment.

However, EU law may preclude this.  The decision of the Court of Justice of the European Union (CJEU) in ZTE v Huawei, referred by the German court, indicates that an alleged infringer can avoid an injunction provided it engages diligently and without delaying tactics in licence negotiations. This will have effect for the purpose of the UPC as well since the UPC is required to give primary force to the laws of the European Union.  It is the EU competition laws which are the root of the argument that no injunction should be available in respect of standards-essential patents since such an assertion is an abuse of a dominant position contrary to Article 102 TFEU.

What precisely the ruling requires parties to do will continue to be worked out through case law.  The English and German courts, in particular, take diametrically opposite views as to what information a patent holder should provide regarding its existing FRAND licences, giving the UPC judges, like the CJEU judges, a divergent jurisprudence to synthesise.

What difference does the value of the dispute make?

The value of the dispute is in theory relevant only insofar as the court fees include a value-based component.   The basic fee (€11,000 for an infringement claim; €20,000 for a revocation claim) will be augmented with a value-based component of up to €325,000 where the value of the claim is greater than €50,000,000.  This would appear to suggest setting a low estimate for the value of the dispute, to keep the fees low.

Militating against that is the experience of the German court system, which applies a similar value-based fee.  However, the value estimated for the case in Germany also has an impact upon the handling of the case by the court administration and the judges.  Apparently a very high value case is treated as more important, so setting a reasonably high value helps to make sure the case is prioritised within the court’s portfolio.  The same may turn out to apply in the UPC – although this will depend on the volume of cases and the impact that the proposed short timetable has on the court Registry’s functioning.

Which methods will a court use to test evidence?

The tools available for the court to test evidence under the UPC appear very flexible and include many of the mechanisms familiar to common law systems, such as:

  • hearing the parties;
  • requests for information;
  • production of documents;
  • hearing witnesses;
  • opinions by experts;
  • inspection of plant or materials;
  • comparative tests or experiments; and
  • sworn statements in writing (affidavits).

However, given the very tight proposed timetable for the entire process there may be less opportunity to explore all of these tools, particularly for defendants.  Further, unlike the leisurely and protracted timetables for depositions and cross-examination at trial which are the norm in most common law courts, questioning of witnesses and experts is going to be under the control of the Court and be limited to that which is absolutely necessary.

As a result, early preparation of a case – either offensive or defensive – will assume greater importance. It will be important to take advantage where possible of any pre-action measures available, and to be prepared before the interim hearing to request and justify all evidential orders which may be needed.

Of particular interest from an English perspective is the power to seek “interrogatories” from a third party.  This is available where that party is found in possession of the infringing products on a commercial scale or to be using an infringing process on a commercial scale.  Interrogatories can even by sought from anyone indicated by such a third party as being involved in the production, manufacture or distribution of the infringing products or processes or in the provision of the services.

What remedies are available at an interim stage?

A patentee can apply for preliminary injunctions or orders for the seizure of evidence against either an alleged infringer or against an intermediary whose services are used by the alleged infringer.

The Court may also order:

  • the seizure or delivery up of products suspected of infringing a patent so as to prevent their entry into, or movement, within the channels of commerce; or
  • the precautionary seizure of the movable and immovable property of the alleged infringer, including the blocking of the bank accounts and of other assets of the alleged infringer (if applicant demonstrates a risk endangering the recovery of damages).

Applications for these remedies can be without notice to the proposed defendant, if the applicant can justify it.  To justify without notice orders the applicant must demonstrate a likelihood of irreparable harm or a demonstrable risk of evidence being destroyed.   This is an area where the local legal cultures of the local divisions may diverge substantially. The Belgian courts, for instance, have been known to order a search and seizure on the basis that a competitor had opposed a patent at the European Patent Office and so should be assumed to be infringing it. The English courts would certainly not be prepared to make such an inference but look for specific evidence of lack of trustworthiness before giving permission.

What protections are in place for alleged infringers?

Orders for interim relief made without notice can be draconian in their effect, potentially including seizure of a broad range of confidential material not necessarily related to the action.  They will also inevitably cause disruption of day-to-day business at the sites where they are executed.  For these reasons, the use of these orders in the UK is subject to stringent controls as to the time and place where a search can be executed and limits on the value of assets frozen.

The UPC rules likewise enable the Court to require the applicant to provide security to compensate the defendant for any likely injury, by deposit or bank guarantee, although they do not require the Court to impose detailed constraints on the execution of any orders.

The rules do, however, permit any party which fears that an application for provisional measures may be made against it to file a protective letter setting out in advance its case as to why it should not be considered to infringe and/ or why the patent may not be valid.  The letter will be retained by the Registry for 6 months, and can be renewed on payment of a further fee.  If an application for a provisional order without notice is made, the Court will take the case set out in the protective letter into account in deciding whether or not to grant it.

The defendant can also apply to the Court for security for its costs of the action more generally.

Appeals

One aspect of the UPC which is very different to the situation in the UK is the approach to appeals. Parties are able to appeal interim decisions, such as orders for interim injunctions or case management decisions. If an interim decision is appealed, the action proceeds nonetheless, but no final decision can be given before the Court of Appeal decides the appeal.  This raises questions as to how this will work in practice.  For example, if the decision appealed is the refusal of an application for interrogatories, this could mean new evidence coming out only after trial.

The Court of Appeal’s early decisions on interim matters, and the Court’s approach to how it progresses the case in the meantime, will be watched with interest.