|*Who* makes |
acts of communication to the public?
[UPDATE at 11:45 am: the text of the judgment is now available here]
Passionate about IP! Since June 2003 the IPKat has covered copyright, patent, trade mark, info-tech, privacy and confidentiality issues from a mainly UK and European perspective. The team is Neil J. Wilkof, Annsley Merelle Ward, Darren Smyth, Nicola Searle, Eleonora Rosati, David Brophy, Alberto Bellan and Merpel, with contributions from Mark Schweizer. Read, post comments and participate! E-mail the Kats here
|*Who* makes |
acts of communication to the public?
"FRAND/Standard Essential Patents
|This is not FRAND (it is a frond)|
The panel was again introduced by Prof Daryl Lim and Nicholas Banasevic started by saying that he was pleased that there was now general consensus that there was a role for competition to play in relation to injunctions based on SEPs where there was a FRAND declaration. Milan Kristof followed up on this by saying that although the CJEU's Huawei/ZTE decision has been criticised for not providing enough guidance on what is required in order from parties to SEP negotiations, in fact he felt that the CJEU had provided as much guidance as could reasonably be expected from a tribunal of its nature. He commented that the roll-out of 5G and IoT could only lead to further litigation and that to address this the Commission is working on a policy paper which is aimed at plugging (some of) the gaps in the Huawei decision.
Dina Kallay agreed that there had been a lot of progress in relation to FRAND commitments but did not feel there had been as much convergence between the varying viewpoints as might have been anticipated. However, she felt the increased level of guidance from the courts was welcomed by industry. David Por also thought the suggestion of convergence was optimistic. There was still divergence in European national courts' application of the Huawei process which ranged from a "box-ticking" or "ping pong" approach all the way to the (UK style) detailed and careful analysis of the patents and licences in question. In addition, he feels there is still insufficient guidance on the valuation of royalties from the courts.
On the topic of setting suitable royalty rates, Dirk Weiler commented that the aggregate royalty rates for smartphones had not changed significantly from the high single digit rates (based on unit price) proposed by several companies for LTE in the mid-2000s. He said that the big patent holders were interested in fostering the market rather than destroying it and that required a dialogue between patent holders and implementers, especially in the IoT sphere. He does not think that the solution is government regulation but accepted that it might come to that if the market players could not agree suitable rates between themselves. David commented that if the early LTE royalties offered by various companies were aggregated, they exceeded the total level of aggregate royalties per product that most companies considered reasonable. That suggested that a solution may not be achievable by companies acting alone, and intervention may be required. Timothy Syrett emphasised that in setting rates, he felt it hugely important that a licensor explains the merits of the patents in its portfolio and further justifies the level of its licence demand, potentially by reference to aggregate royalty rates.
Sir Robin Jacob commented from the audience that the UK Unwired Planet decision that a FRAND declaration amounts to an enforceable contract was, in his view, a game changer since it meant that the courts can now deal with the question of the appropriate royalty rate without further regulatory intervention. Nicholas commented that the Commission still considered there was a role for competition law in setting rates, but agreed that now the principles had been established, national courts could implement them and the Commission was happy for them to do so - this was a positive development.
Dirk returned to the topic of transparency and said the ETSI IPR Committee were now focusing on increasing transparency as regards patent holdings. In his view, the ETSI requirements for patent holders were very specific; however disclosure requirements varied between organisations in the industry and ETSI was therefore working to enhance its own declaration requirements and to make the declarations database more transparent.
Dina mentioned that industry was working on a "one stop shop" patent pool for cellular patents for 5G IoT devices which she hoped would be successful. Dirk commented that there was ongoing discussions relating to 5G between the automotive/wireless industry; he repeated that in his view it was preferable for the industries to agree amongst themselves than for solutions to be imposed externally.
Fred faces off with the UP judgment
The panel turned next to an analysis of the UK Unwired Planet judgement (with Mr Justice Birss pricking up his ears in the audience). Nicholas said that it was a fair application of Huawei/ZTE and while the Commission would have liked to have seen an analysis of the value of the technology ex ante as well as ex post, the decision reflected the principles that the Commission believes should be applied. Milan commented that it was interesting to see the first European judgment which considered FRAND in detail – and that he would have welcomed even more discussion on the interaction between competition and contract law. He noted that the General Court had held in Microsoft that FRAND could be a range as well as a single number and speculated that this could perhaps be considered in future cases.
Dina welcomed the assessment of royalties on a global basis. She thought the basis of the assessment was broadly consistent with Google v MMI in the US. David noted that the judgment was very pragmatic and accepted that setting a FRAND rate will always involve a degree of approximation. He responded to Nicholas's comment on FRAND ranges by saying that ranges were inherently difficult to set Tim raised concerns about setting a worldwide licence without engaging in an analysis of where portfolio patents are (or are not) in force or valid: he felt that this placed the onus on the licensee to take a licence whether or not all the patents were valid. He also noted that whilst royalty rates had been addressed in detail, he would also have liked to see further discussion of the appropriate royalty base to which those rates should be applied.
Jane Mutimear asked the panel whether any further regulatory involvement was really necessary (whether in traditional wireless industries or others) in light of the recent cases. Nicholas agreed that prescriptive regulatory guidance was not needed but thought that, given the likelihood for IoT participants to be relatively inexperienced, some level of clarification could be merited to facilitate implementation of the principles already set out. David suggested that although the initial cases in this area would inevitably be heavy with legal arguments, subsequent cases should be streamlined once an initial body of jurisprudence has been developed.
Patent Assertion Entities
After an introduction by John Richards, Nikolaus Thumm presented on a recent report on PAEs in Europe. He introduced the history of activity by PAEs in the telecoms sector and noted that increasing interoperability is likely to see increased PAE activity in the automotive and white goods sectors, but that the report had found no evidence of assertions against European SMEs.
Whilst some commentators have suggested that the introduction of the UPC will lead to increased assertions by PAEs, Nikolaus suggested that the structure of the system contained some specific features which would prevent this.
Suzanne Munck followed up by commenting on the results of an FTC report on PAEs and said that the FTC had worked together with the JRC on policy in this area. The FTC report defined PAEs as entities which have acquired their patent portfolios and do not work them (as opposed to NPEs, which file their own patents). The study covered 22 PAEs and >300 asserting affiliates over a 5 year period and the FTC had observed two main business models, described as litigation PAEs and portfolio PAEs. The FTC found that the separation between the two was clearly defined, with litigation PAEs obtaining 93% of their licences after bringing proceedings. The portfolio PAEs typically negotiated licences without resorting to litigation (albeit they did sometime litigate, and negotiated under the shadow of litigation) and generally held larger portfolios. The study looked at >37,000 patents, of which 75% had software related claims and therefore the study concluded that the majority of these issues were focused on the tech sector.
Scott W Burt suggested that the majority of so-called "troll problems" originated from litigation PAEs rather than portfolio PAEs, which in his view behaved like the licensing arm of manufacturing companies. In response to a question about how much Conversant invested in R&D, Scott commented that its current R&D spend is zero – with its patent portfolio being a combination of patents developed in house with those bought in.
Approaching matters from a more philosophical point of view, Myles Jelf started from the contention that patents reflect a valuable item of property awarded to the patentee in return for their disclosure of the patented invention to the public. In his view, any change in the rules regarding injunctions or assertions in order to disfavour one or other category of patentees based on their business model was not merited – he noted that this could potentially have unintended consequences (for example harming universities or lone inventors who may not be able to afford to commercialise their own invention). However, there was possibly a case for special treatment based on the scenario in which a patent is asserted. For example, the FRAND rules for SEPs are designed to compensate for the distorted value of patents included in standards so that those patents do not acquire a value disproportionate to their technological contribution.
Steven Lieberman suggested that the boundary between litigation and portfolio PAEs was graduated. He saw an increasing trend in the US courts for conscientious judges to speed up early case resolution (for example by granting summary motions), which was itself driving a trend for earlier settlement. He also commented on the value of the IPR procedure for swiftly resolving patent assertions where the strength of the asserted patent is low."
Everyone knows the AmeriKat is not a morning person. Although in recent months she has been up and out at the crack of dawn, she is not a fan preferring prowling into the quiet night undisturbed. So although there were two Sunrise Sessions at Fordham that struck her fancy (especially the data mining session), she left the reporting to her German pal Christopher Weber (Kather Augenstein). The AmeriKat enjoyed reading the report, which touched on points raised in her presentation the day before in the trade secrets session as to whether and what role sufficiency (and indeed plausibility) should really have in patent validity given the reality of technical disclosure in the product development cycle and the disclosure doctrine, while safeguarding against speculative patents (subject of another post). Christopher reports:
"After getting an early start to my New York day, being fortunate enough to still be operating internally on CET, this Kat friend arrived early to the second day of the excellent Fordham Conference and just in time to eat bagels, drink coffee and attend the slightly misleadingly named “Sunrise Seminar I: Second Medical Use & UK Plausibility”. As it turned out, it was 99% about plausibility and only 1% about Second Medical Use.
After an introduction by Brian Cordery (Bristows), who highlighted the importance that the plausibility check has gained in patent validity matters in the UK, Floyd LJ explained the complete history of plausibility in less than 5 minutes and with 5 decision. An astonishing act made somewhat necessary/easier by the strict rules of the conference itself. He reported that currently most cases would contain the allegation of lacking plausibility, which certainly raises the question why someone would use an implausible solution or even fight about it in the first place. The issue here is of course, that one has to look at the priority date.
The trouble began – so to say – with the EPO decision in AgrEvo/Triazole Herbicides (T 0939/92) of September 1995 – which does not even contain the word “plausible”. Headnote 1 of that decision describes the problem:
"1. If a claim concerns a group of chemical compounds per se, an objection of lack of support by the description pursuant to Article 84 EPC cannot properly be raised for the sole reason that the description does not contain sufficient information in order to make it credible that an alleged technical effect (which is not, however, a part of the definition of the claimed compounds) is obtained by all the compounds claimed (see reasons 2.2.2)."
The notion that there needs to be support e.g. in the form of (rudimentary?) test data or experiments first found its way into English law with the Prendergast’s Applications decision, which concerned four speculative applications in the swiss-type claim format for new medical uses of known compounds. The decision to decline the application was upheld to prevent applications being granted “in relation to all sorts of speculative uses for established drugs and other chemicals without a shred of evidence as to whether they would work, let alone as to whether they do work.” The other cases that were discussed where HGS v Lilly (follow this link to a classic Jeremy’s discussion of the “mega-judgment”) which set the bar at “an educated guess can suffice” and “some real reason for supposing that the statement is true” and Regeneron v Bayer in which an implausibility attack against the use of VEGF antagonists for certain diseases failed because the patent claim was deemed to be based on a “fair prediction”. Finally, in Warner-Lambert v. Generics UK the UK Court of Appeal found that the claims alleged to be infringed lacked sufficiency, because the patent did not render it plausible that it would work. The case law was summarized by the guideline that the patent’s monopoly should not exceed the patent’s contribution to the art and that it should not be possible to write a patent from an armchair. Although still “if you are lucky enough to draw up a working experiment, you would get it past the examiner”.
The Lilly mega judgment on "educated guess"
The first question of this still quite early day was asked by Trevor Cook and it turned out to be as concise as it was pertinent: “It is an old problem, why do we need a new solution?”
The "Plausiblity Attack Kat" is coming for your patent
Nicola Dagg (A&O) gave her perspective on the problem and pointed out that plausibility as a separate revocation ground is neither found in the UK Patents Act 1977, nor in the EPC and may even be prohibited by TRIPS because it is a limitation of intellectual property rights. She posited that it should be deemed sufficient if the active ingredient could be made and successfully used to treat the claimed indication at the priority date. Most cases would only cover a fraction of possible use cases and the EPO’s Factor-9/JOHN HOPKINS (T1329/04) considered that supplementary post-published evidence may in the proper circumstances also be taken into consideration, however, that it may not serve as the sole basis to establish that the application solves indeed the problem it purports to solve. She stressed that there is a need for a strong incentive for expensive medical research and that it is economically vital that the patent is able to file before clinical testing (which becomes public) even if the only available data to support the claim may be from animal testing.
Judge Rian Kalden of the Court of Appeal of The Hague, Dr. Ute Kilger (Böhmert & Böhmert), Munich, and Miquel Montana (Clifford Chance) then reported on their respective countries’ perspectives on plausibility as a separate requirement. I think it is fair to save everybody’s reading time by saying that there is hardly any such separate requirement in these countries and that the respective questions are handled under the headlines of sufficient disclosure and inventive step. It is not necessary e.g. that each and every claimed compound is explicitly disclosed to solve the patent’s problem.
Jürgen Dressel, Head of Global Patent Litigation Strategy at Novartis gave the innovators industry’s global perspective. The industry would increasingly be faced with prior art created by its own medical trial data. Thus, there is a need to safeguard inventions on the basis of surrogate parameters such as animal data or genetic data from which it should be fair to extrapolate from. His main wish, however, was for a realistic and pragmatic threshold for plausibility on a global basis. The industry would need patents across jurisdictions which diverge on this question around the world. He characterized the US as one extreme which would allow filing early for the patent and supplement tests only later and Asian countries as the other extreme where a lot of data would be needed early to get a patent. After all, the industry would need harmonization to have a fair chance to get a patent.
This started the more general discussion. Here different attendees voiced concern for the Canadian patent system (i.e. the promise doctrine) in this regard before coming back to second medical use claims. It was posited that they are per se a functional limitation of a claim and that in the end the question should always be for the technical contribution of the patent. This was indeed the consensus: Patents need to add to the prior art to fulfil their part of the contract between patentee and society, i.e. disclosure for protection. However, no consensus emerged on the question whether there should be a plausibility test in the first place against the background of TRIPS and the limited number of revocations grounds enumerated in law.
Nevertheless, in the end everybody agreed with Brian Cordery, that the Sunrise Seminar was plausible in the original meaning: worthy of applause."
Friday afternoon. For those still standing, the Fordham conference opened up a treasure trove of interesting topics with a little something for everyone. Laura Whiting made her way to the panel discussion on Pharma, IP & Competition where she reports:
"After introducing the speakers, Prof Daryl Lim, Koren Wong-Ervin explained the background to reverse payment cases in the FTC. She commented on her surprise that other countries had cases relating to patent settlement despite not applying regulatory procedures comparable to the Hatch-Waxman system. She noted that she was concerned by the apparent recent approach of the EU General Court to apply a truncated market analysis, as in her opinion it was preferable to apply a full market analysis to each product and case. She also felt that it was problematic to exclude an evaluation of the validity of the patent(s) from the economic or market analysis.
Jürgen Dressel noted that the European cases showed parallels to the "rule of reason" cases coming out of the FTC. He said that although there was no system similar to the Hatch-Waxman regime in the EU, the Servier and Lundbeck cases had showed that the arrangements that were entered into between companies could be extremely complex. In his view, the most concerning aspect for the innovator pharmaceutical industry of the recent decisions was the very narrow definition of "market", which was essentially restricted to the particular molecule in question. The other concerning issue was that the "by object" definition effectively shifted the burden of proof onto the patentee as soon as any payment was identified.
Cordula Schumacher noted that since the settlement agreements that were the subject of the recent EU decisions involved so many market players, in her view it was not appropriate to reverse the burden of proof – the situation was too complex for such a simplistic approach.
Justin Watts commented that the agreed facts on which the General Court in Lundbeck made its decision were such that the originator had paid the generic an amount equal to the profits it would have made by selling the drug, without regard to this being linked to the (potential) patent infringement that such sales would arguably have amounted to. In this extreme case, he says it is understandable that the Court found there to have been anticompetitive behaviour. However he questioned whether this reflected the real world situation of most disputes and whether it was really possible to apply a bright line test holding any transfer of value to be a problem to other cases, which were inevitably more complex than the assumed fact pattern on which Lundbeck was based. What was needed was a full analysis of the reality of the competitive environment that obtained in fact in every case. Deputy Director-General, DG-Comp Cecilio Madero Villarejo commented from the audience that last autumn, the General Court had considered revising its decision that the Lundbeck agreements were anti-competitive, since they had replaced the uncertainty of determining the validity of the patents with the certainty provided for by the agreement in question.
Jürgen asked him whether the Commission still considered that there were still issues regarding reverse settlements following the sector inquiry. Cecilio explained that the reason why Commissioner Vestager has decided to retain the reporting requirements for this year is because the EU Parliament had asked the Commission to keep looking into the pharmaceutical industry. He commented that the source of this focus from the Parliament appeared to be the recent news stories relating to alleged price hikes for generic products. Cordula commented on the cost burden that the continued requirement to answer questionnaires imposed on companies within the sector – and queried whether the Commission had considered the investment that is required? Cecilio answered that this was one reason why the Commission had intended to discontinue the questionnaire this year.
Justin reiterated that the results from the sector inquiry demonstrated that only 10% of the agreements collected involved a reverse payment, and of those only 2% were considered by the Commission to be in any way problematic. He commented that in light of this low prevalence, it would be helpful to have guidance from the Commission, perhaps even a safe harbour, to assist companies and their advisors to settle patent cases. Cordula agreed that clear guidance would be useful and commented that legal certainty was highly valued by clients, so in effect it did not matter what the law was, as long as it was clear. Lawyers would then be able to better advise their clients.
It was suggested from the audience that a suitable safe harbour for the US might be that a settlement agreement should not allow any exclusivity period for the generic (which would in effect waive its Hatch-Waxman rights). It was suggested that this would bring pharmaceutical settlements into line with other industries where there is always some kind of reverse payment in return for a settlement, but there is not usually any accompanying exclusivity period. Koren did not agree that the 180 day exclusivity period needed to be waived as it represented a legislative compromise designed to encourage Paragraph IV challenges by generics. Jürgen said that he admired the US system as it was predictable, in contrast to the European situation which was unpredictable and varied by country.
In response to a question about whether there were any parallels which could be drawn from the recent cases on SEP licensing, Justin commented that there were interesting lessons to be learned from FRAND cases, but there are huge differences between assessing the royalty rate for a single basic patent to a compound, and the rate to apply to a whole portfolio of patents on eg. LTE technology. Jürgen saw little interaction between the two licensing models but noted that this might change in the future, perhaps in the area of personalised medicines, if products evolved which involved a more complicated IP position than traditional small molecules."
|The fresh smell of some IP blogs!|
|The IPKat trying to stop time on a novelty clock.|
"The patent in suit concerned a polling system for use in a wireless communication network. At first instance, Birss J held the patent to be valid and infringed by wireless telecommunication networks that operate in accordance with the LTE standard i.e. the patent was standard essential.
Huawei was ultimately unsuccessful in its appeal of the Judge’s findings on novelty, entitlement to priority and inventive step, but the judgment raises some interesting issues concerning:(i) what constitutes the state of the art for the purposes of novelty and in particular what is meant by “before the date of filing” under Article 54(2) EPC;
(ii) the approach to entitlement to priority where implicit disclosure is relied upon; and
(iii) challenges to a finding of inventive step where the Judge at first instance relied upon secondary evidence.
Article 54(2) EPC states that ”the state of the art shall be held to comprise everything made available to the public by means of a written or oral description, by use, or in any other way, before the date of filing of the European patent application [emphasis added].”
There was a dispute as to whether the “Ericsson TDoc” formed part of the state of the art. There was however no dispute that if the Ericsson TDoc did so amount, the Patent was anticipated.
The “Ericsson TDoc” was uploaded to a publically available server operated by the European Telecommunications Standards Institute (ETSI) in Europe at 08:36 (CET) on 8 January 2008 / 02:36 (EST) on 8 January. Over 14 hours later, the priority document was filed at the USPTO, which was under EST at the time, at 22:59 (CET) on 8 January / 16:59 (EST) on 8 January.
Huawei alleged that as the Ericsson TDoc was made available at a point in time where it was 7 January in some parts of the world (including Hawaii and California), it had been made available “before the date of filing” and thus formed part of the state of the art for the purposes of novelty.
For the visual learners, the Court of Appeal helpfully set out the below table summarising the position [emphasis added]:
CET (GMT +1) GMT EST (GMT -5) Hawaii (GMT -10) Ericsson TDoc uploaded to ETSI server 8 Jan 08:36 8 Jan 07:36 8 Jan 02:36 7 Jan 21:36 Priority Doc filed at USPTO 8 Jan 22:59 8 Jan 21:59 8 Jan 16:59 8 Jan 11:59
At first instance, Birss J asked two questions: (i) what is the priority date?; and (ii) was the putative prior art made available to the public before that date? Birss J considered the timezone in the patent office of filing to be the relevant one for determining both questions. Thus the Ericsson TDoc was made available at 02:36 on 8 January which was not “before the date of filing” for the purposes of novelty. “The fact that this time was 7th January in some places in the world such as Hawaii is irrelevant.”
Floyd LJ upheld Birss J and set out the position as follows: “The priority date is the 24 hour period of the day on which filing took place, in the time zone of the patent office where it was filed. The publication must occur before that day, on a time basis, by reference to the time zone of the patent office of filing.”
Entitlement to Priority
The key question before the Court was whether there was disclosure in the priority document of polling "upon assembly" i.e. just before the data unit was transmitted rather than afterwards notwithstanding references in the priority document to the counting and polling of “transmitted” data units and bytes.
In determining the issue, Floyd LJ emphasised a number of points that should underpin the Court’s analysis:
- the threshold for entitlement to priority is significantly lower than that for determining whether a claim is novel: “the exercise of determining priority involves asking whether the invention is directly and unambiguously derivable from the priority document, not whether every possible embodiment of the invention is so derivable.” To adopt the alternative approach would make claiming priority “impossibly hard”;
- the priority document must not be read in a vacuum: “both explicit and implicit disclosure must be taken into account”. This is not the same as adding to the disclosure something which is obvious in light of it; and
Floyd LJ held that the trial Judge was entitled to base his finding on the common general knowledge functionality of UMTS. Accordingly polling upon assembly was disclosed in the priority document. “To read it otherwise would be to do so in a vacuum.”
- due to the importance of assessing the common general knowledge in order to determine what is implicitly disclosed, an appellate Court must exercise caution when interfering with a first instance finding relating to priority.
The inventive step issues focused on the Judge’s approach to secondary evidence. Obviousness was alleged over a single piece of prior art – the Motorola TDoc – a submission to the relevant 3GPP standard setting committee (“the Committee”). At first instance, the Judge identified the fact that by the priority date the Committee had rejected the proposals in the Motorola TDoc as Unwired Planet’s strongest argument against the allegation of obviousness.
Huawei argued that the Judge was wrong to have placed such weight on the secondary evidence and that the "primary" evidence of the expert witnesses effectively compelled a finding of obviousness. The Court of Appeal reiterated the oft-cited reluctance with which an appellate Court should interfere with a first instance finding of an obviousness. The Court noted that Huawei’s submission “effectively requires the court to conduct a detailed review of the expert evidence to see whether it did indeed compel a finding of obviousness.” The Court went on to say that if Huawei’s submission did relate to an error of principle, “it would seem to require an almost complete review of the evidence by this court in every case where secondary evidence is relied on.” This, said the Court, would be a “serious inroad” to the approach to obviousness on appeals.
Despite these reservations, the Court did go on to consider and reject the suggestion that the primary evidence did indeed compel a finding of obviousness, or that the Judge thought that the primary evidence showed that the invention was obvious. However, in view of the Court of Appeal’s qualms with the approach, it seems unlikely that submissions of this nature will be welcomed in future cases."
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