Bifurcation at the UPC – competition policy squeezes and the scope for trolls

Bifurcation at the UPC – competition policy squeezes and the scope for trolls

03 June 2014

Patent litigation practitioners in the courts of England & Wales are not generally known for their love of competition law. But now that old 'enemy' may be about to come to the aid of patent practitioners in the face of a Greater Evil, namely German-style bifurcation.
 
For the uninitiated, bifurcated patent proceedings are those where issues concerning patent validity and infringement are partitioned into separate hearings, possibly even - as in the German model - before different courts. One of the features of the UPC regime [Unified Patent Court - where have you been?!], at least as currently proposed in the 15th round of draft rules, is that it does indeed provide for separation of infringement and validity issues, at least in some cases.
 
Patent litigators' concerns about this are perhaps less focused on the tendency for the validity trial to lag behind the test of the infringement position (as the German model suggests is the likely outcome) than about the reduced scope for pressurising the other side via the famous (in patent circles) squeeze on validity.  For the uninitiated, this “squeeze” arises from the fact that infringement will often be easier to prove on a broad reading of the patent, whereas proving that the patent is valid, i.e. novel and non-obvious, may need a narrow reading to be adopted.  This dream of many a litigator is to apply the squeeze on an opponent, without its own case similarly suffering.  [We don't want to use this blog to bang on about this ad nauseam, but this is again the sort of point which demonstrates that questions of patent validity are just a teensy bit more complex than DG Comp would have us believe.]
 
The fact that there is a competition law angle to this is something that we have mused on among ourselves.  After all, a driving rationale of recent Commission case law and policy has been the removal of invalid patents (cf. its approach to settlement agreements in Lundbeck, the revised revised Technology Transfer Guidelines and the Patent Monitoring reports), as well as ensuring that would-be licensees are not unfairly pressurised into taking a licence by being deprived of the right to raise invalidity defences (cf. the recent Motorola decision).  It is therefore more than a little surprising that the UPC, which was promoted by the DG Competition as a vital policy development for resolving some of the market problems identified as a result of the Pharmaceutical Sector Inquiry, should countenance a system like the German one which allows infringers to be penalised before their defences as to validity are heard.
 
It appears that we are not the only ones to have identified this clash of policies.  Belgian MEP Marc Tarabella has recently posed two related questions for written answers by the Commission.  First, M. Tarabella asks whether the Commission is aware that bifurcation will assist “patent trolls”** to abuse a dominant position by seeking to obtain injunctions on invalid patents; secondly, he asks whether, to avoid this risk, the Commission will support the suspension of injunctions until after a ruling on validity.
 
This is not the first time that M. Tarabella has raised concerns about the scope for the UPC to facilitate “troll”-type activity in the EU.  As reported by the ever-informative IPKat blog back in January, M. Tarabella received short shrift from the Commission to his last question which in effect raised the same issue.  In a rather extraordinary answer, the Commission at the time absolved itself from all responsibility for the unified patent regime that it has pushed forward, stating that “the UPC agreement is an instrument under international law and is not part of Union law. The matter is thus outside the Commission's remit”.  Rather more to the point, the response also noted that the right to an injunction under the draft UPC rules is not automatic, that the likelihood of proving validity may be taken into account, that security may be ordered against the grant of an injunction (i.e. equivalent to the current cross-undertakings in damages regime for interim injunctions in English patent proceedings) and that there is in any event no obligation to refer a counterclaim for invalidity to the Central Division.
 
Even in the light of the Motorola decision, it is hard to foresee the Commission providing a very different answer now.  Indeed, the suggestion that infringement proceedings should sometimes be stayed pending the outcome on validity is arguably consistent with the rationale in Motorola, even if the requirement for a “high likelihood” of invalidity is both onerous and unclear.  Nevertheless, both patent practitioners and competition lawyers will watch this “squeeze” on the Commission with interest.
 
** I was sorely disappointed to see that the French (in which this question was originally posed) for “patent trolls” appears to be “patent trolls”, rather than “lutin des brevets”, or similar...
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