IP Basics: Patent enforcement

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Welcome to the latest episode of Gowling WLG's global Intellectual Podcast where we discuss a range of topics to help you protect your brands, creations and inventions. 

Mathilde Grammont:  Imagine, someone has copied your company's biggest product and is selling it in Europe. You have protected your invention with a patent and invested a lot of research and development to come up with this invention. Sales are dropping, customers are complaining about quality, and your CEO wants answers.  What's your first move?

Felicity Wade-Palmer: That's a tough situation, Mathilde. I am Felicity Wade-Palmer, an associate at Gowling WLG in the intellectual property team in London.

Mathilde Grammont: And I am Mathilde Grammont, a senior associate working in the patent litigation team in Paris.  Previous podcasts in this series have touched upon what a patent is and the reasons to spend money obtaining patent protection. As we heard, one of the key reasons is to protect the market for an inventive product or process.

Today, we will look at how to go about doing that in more detail, covering the who, what, where and how of bringing proceedings. As part of this, we will also explore some of the key differences and the common ground between different national and international approaches and explain what every in-house lawyer needs to know to act fast and effectively when their patent rights are being infringed.

 

Felicity Wade-Palmer: We will also look at the type of arguments you might face when enforcing your patent rights, or which you might want to employ if defending a patent infringement claim or clearing the way before bringing a new product onto the market.

Mathilde Grammont:  Let's start by delving into the fabulous global world of patent litigation. If you want to prevent someone from infringing your patent, and a resolution cannot be reached amicably, the next step is to bring an action against the alleged infringer.

Felicity Wade-Palmer: Prior to taking any legal action, there are several prerequisites you need to meet. So, who can bring a claim?

Mathilde Grammont: Naturally, the patentee, which means that it has either filed the patent application or has been assigned with it later on as standing. This assignment agreement must nonetheless be recorded under relevant patent registry, as patents are territorial rights: so UK registry for UK patents, French registry for French patents.  The same applies when the patent is held jointly by two or more patentees. Where things can sometimes get tricky is if the patent is owned by a different company to that which has suffered the harm in terms of lost sales. In those discussions, it is worth seeking advice on how best to structure the claim to ensure that the ability to recover damages is maximised.

Felicity Wade-Palmer: Licensees can also be entitled to bring a claim, depending on the type of licensing agreement entered into.  In the UK, France and before the Unified Patent Court, the principle is that exclusive licensees can act except if provided for otherwise in the licensing agreement, subject to prior notice being sent to the patentee. Non-exclusive licensees may also be able to act subject to prior notice being sent to the patentee, but only if they are entitled to do so under the licensing agreement.

Mathilde Grammont:  In any event, if a patent holder brings a claim, any licensee can join to be awarded with damages for its own harm. And naturally, if the action is brought by a licensee, the patentee can always join.  However, if the patentee is not party to the proceedings, the defendant will not be able to counterclaim for revocation and will have to force the patentee to join the proceedings.

Felicity Wade-Palmer: In Europe, to ensure the standing of the licensees will not be challenged, we strongly recommend recording the licensing agreement with the Patent Offices prior to initiating any claim.  In the UK, there is no requirement to register a license before bringing proceedings.  However, non-registration can affect a licensee's ability to recover its costs in relation to such proceedings.

Mathilde Grammont:  Further, before the UPC or French jurisdictions, no patent litigation can be brought without being represented by an external counsel duly admitted to the bar, who will represent, assist, file the submissions, and argue the case orally.

Now that we looked at the who, let’s look at the where to bring a claim.

Felicity Wade-Palmer:  Depending on the location of the acts of infringement, you will have a choice of courts available to you. Subject to limited exceptions (which we will discuss), patents are a national right that are enforced by national courts, so where you bring an action will depend on where you have a patent and where the infringements are taking place.

This could be in more than one territory, particularly where a supply chain is involved, so part of your initial strategy should include identifying where the infringements are taking place, and identifying which court, or courts, will have sufficient impact to stop the harm from occurring.

 

For example, if the infringer is manufacturing in a territory in which you own patents, then seeking an injunction in that territory may achieve your objective. However, if the infringements are more geographically spread out, then it may be necessary to commence multiple actions to obtain redress or force settlements.

 

So, what are the options for starting a case where the infringements are taking place in Europe?

 

Mathilde Grammont: If you have a French or a French national European Patent (EP) and acts of infringement have taken place in France, the Paris Judicial Court has exclusive jurisdiction for first instance infringement cases.  Further, given the territorial effect of the patent, Paris Court has exclusive jurisdiction for revocation action of French patents and French national part of EPs.

However, it is common that infringements in Europe are not limited to one territory, let's say France, but it may also be occurring in others, such as Germany or Italy.

 

You can, of course, also issue proceedings in those national courts, but that starts to become very expensive. And this is where the limited exceptions to enforcement by national courts that Felicity mentioned earlier becomes relevant and this is currently a hot topic in patent litigation for two reasons:

 

First, the Court of Justice of the EU has recently confirmed that a national court of an EU member state can hear and determine proceedings for infringement of foreign patents where the defendant is domiciled in their jurisdiction. That is a fast developing and complex area, which is beyond the scope of today's podcast.

 

Felicity Wade-Palmer: Of more immediate relevance is the Unified Patent Court, which is a super-national court that can determine issues relating to infringement and validity of patents across multiple EU member states and beyond.

The UPC was introduced on 1st June 2023 and currently covers 18 EU Member States. The UPC has exclusive jurisdiction for Unitary Patents and, for now, regular EPs that have not been opted out. The UPC comprises several divisions in which patents can be enforced.

 

Mathilde Grammont:  The Central Division, which has its seat in Paris, with two sections in Milan and Munich, also has exclusive jurisdiction for revocation actions. The regional and local divisions have jurisdiction for infringement acts. A certain degree of forum shopping is therefore possible within the UPC as the choice of jurisdiction can be based either on the place of domicile or establishment of the defendant or on the place where the acts of infringement or threats of infringement are taking place.

But, Felicity, as the UPC doesn't cover the UK – what are the options there?

 

Felicity Wade-Palmer:  In the UK, the High Court and the Intellectual Property Enterprise Court (IPEC) both have jurisdiction to hear patent infringement claims relating to GB or EP (UK) patents, but they cater to different types of cases.

Mathilde Grammont:  For strategic purposes, the claimant might choose a venue based on timeline and costs. Felicity, could you explain the differences between the High Court and the IPEC?

Felicity Wade-Palmer: Sure.  Choosing between the High Court and the IPEC for a patent infringement claim often depends on factors like time, costs, and the extent you expect to recover legal costs for bringing the claim if you win (and liability for costs if you lose).

The Court fees are the same for both and depend on the amount being claimed. For instance, the fee for a £10,000 claim will be £455 and for claims over £200,000, the fee is capped at £10,000.

 

The High Court is suited to complex, high-value disputes as there is no cap on damages or costs and offers a comprehensive process, including extensive disclosure if needed and cross-examination of expert and fact witnesses. However, this level of detail can lead to higher expenses and longer timelines, often taking 12 to 18 months to resolve.

 

Mathilde Grammont:  Alright, on the other hand, the IPEC is designed for smaller-scale disputes, with a streamlined procedure that keeps costs lower and resolves cases faster, aiming for resolution in approximately 12 months. It also caps recoverable damages at £500,000 and limits cost recovery to £60,000, providing greater predictability in expenses.

Felicity Wade-Palmer:  For businesses or individuals with limited resources, or for cases that do not require extensive legal manoeuvring, the IPEC may be a more practical and efficient choice. This flexibility allows claimants to weigh their priorities and choose the forum that best suits their needs. It is particularly well suited to mechanical patent cases which may involve less extensive expert evidence or experiments.

There is also a 'halfway house', which is the Shorter Trial Scheme in the High Court. This is limited to a four-day trial in the High Court but is designed to deliver judgment in 12 months and it caps recoverable costs at £500,000. It is probably the most similar in costs to proceedings in the UPC.

 

Mathilde Grammont:  Looking to court fees, bringing an action before the French Court is free. Only the attorney costs are due, and they are recoverable.  In practice, though, none of the parties will fully recover the incurred costs. In terms of length, it takes around 24 months (at least) to obtain a decision on the merits, which will cover both liability and damages.

Felicity Wade-Palmer:  In contrast, starting a UPC infringement action can be much more costly initially  €11,000 for fixed costs and a value-based cost which can be up to €325,000. These fees are recoverable in part. Timewise, a claimant can have a decision on liability between 12-13 months or 17 months before German divisions. The decision on costs is subject to a distinct application. The advantage is obviously the territorial scope of a UPC decision.

Mathilde Grammont:  The UPC interprets its jurisdiction in a very broad manner, both materially and territorially, as we said, leading to a very extensive territorial scope, what is called long-arm jurisdiction. Therefore, in some certain circumstances, the choice of venue should be made strategically to reduce costs whilst obtaining a broad territorial effect. We at Gowling can help you with that.

Mathilde Grammont:  Something else to consider before acting is whether the claim is not time-barred. In France and before the UPC, there is a five-year statute of limitations. This means that a patent owner must initiate legal action within five years from the date they become aware (or should have become aware) of the infringement.

Felicity Wade-Palmer:  In the UK, the statute of limitations for filing a patent infringement claim is slightly longer at six years. In each Court, it is worth mentioning that if the acts are continuing, the starting point for the statute of limitations is from when you bring the claim, but you will only be able to recover damages for the previous five or six years.  If the infringements have been going on for longer, you will not be able to recover damages for the period before that.

So timely action is essential to safeguard intellectual property rights and ensure the opportunity to seek damages.

 

Mathilde Grammont: So now we have checked standing and that we are not time barred, what next?

Felicity Wade-Palmer:  Before initiating a patent infringement claim in the UK, in most cases UK procedural rules require the patentee to send a letter before action.  Sometimes patentees will have sent what is commonly known as a cease-and-desist letters before this letter, and sometimes it will form part of the same correspondence.

A cease-and-desist letter formally requests the alleged infringer to stop their activities and can serve as a precursor to legal proceedings.  The letter before action is similar but it needs to set out firstly the concise details of the claim and the basis on which the claim is made as well as a summary of the facts and what the claimant wants from the defendant.

 

The defendant will ordinarily be given a reasonable period of time to respond before the claimant then commences proceedings.

 

Mathilde Grammont:  Caution is needed when sending these letters to avoid making unjustified threats.  In the UK, unjustified threats occur when a patent holder makes a threat of legal action that is not supported by a valid claim of infringement.  This can happen if the alleged infringer does not actually violate the patent or if the patent itself is not invalid.  A common 'threats' scenario is where a retailer stops stocking a product due to the threat of infringement.

Felicity Wade-Palmer:  Making unjustified threats can lead to counterclaims and the risk of damages being awarded against the patent holder.  Therefore, it is crucial to ensure that any cease-and-desist letter or letter before action is drafted with threats in mind.

Properly drafting this letter can help protect your intellectual property rights whilst minimising legal risks.  Similar provisions exist in other European jurisdictions, but these are often under the remit of unfair competition.

 

Mathilde Grammont:  There is no need to send a cease-and-desist letter or take other pre-action steps in France or before the UPC, except if you are asserting a Standard Essential Patent (SEP).  In the case of an asserted SEP, a notice containing details of the alleged infringement must be sent prior to initiating any judicial action.

Felicity Wade-Palmer:  No matter what court you are before, it is important to gather evidence to substantiate your claim.

Before bringing a patent infringement claim, it is often necessary to make 'trap purchases.' A trap purchase involves buying the allegedly infringing product to gather concrete evidence of infringements. This step is crucial because it allows the patent holder to verify that the product does indeed infringe on the patent and establish who is responsible for the infringing acts.

 

In France, a bailiff is often used to carry out the trap purchase which makes the evidence stronger and harder to challenge.

 

Mathilde, how is this evidence used in the French courts?

 

Mathilde Grammont:  In French Courts and the UPC, the process is written and more front-loaded. The claimant must provide detailed evidence of infringement in the initial Statement of Claim, including documents, witness statements, and expert reports. This comprehensive approach ensures that the court has all necessary information from the outset of the proceedings.

Felicity Wade-Palmer:  In the UK, this evidence is used to support the claim by demonstrating how the alleged infringer's product violates the patent.

In the High Court, the amount of evidence needed to get a claim started is more limited. Relevant facts will need to be set out in the claim itself which is signed by a statement of truth, and certain documents will be provided by way of initial disclosure.

 

However, the majority of the evidence is not usually filed until later on in the proceedings via written reports, experiments or product descriptions, and it is then examined during the trial, where both parties can call expert witnesses and cross-examine each other's experts. 

 

This means it can be relatively straightforward to issue proceedings quickly in the High Court, which can be helpful in prompting settlement. The IPEC however is more similar to European procedure in that it requires more evidence to be front loaded.

 

Mathilde Grammont:  If the evidence of the infringement acts is hard to establish, the French legal framework provides for a very powerful tool called 'saisie-contrefaçon,' which also exists, with more variations, before the UPC under the name order to preserve evidence. This tool allows an applicant, once authorised by the Court, to go unannounced visit any premises (of an alleged infringer, a client, a distributor or supplier or even a booth at a trade fair) and gather material evidence of the infringement.

Felicity Wade-Palmer:  That's so interesting, Mathilde. In the UK, we don't have a direct equivalent to 'saisie-contrefaçon,' but we do have mechanisms to gather evidence such as orders for disclosure.

OK so let's imagine now, that all the necessary pre-steps have been undertaken, and you bring the action on the merits, further to or without a 'saisie', what can you expect from the alleged infringer?

Mathilde Grammont:  In response to a patent infringement claim, defendants typically employ several key defence arguments.  We will be going through the different types of infringement and common defences in more details in other podcasts looking at infringement and validity in depth, but we will mention a few today to whet your appetite.  A common defence is non-infringement, where the defendant will assert that their product or process does not actually infringe on the patent in question.

Additionally, defendants might invoke the prior use defence, which protects those who have commercially used the patented invention before the patent's filing date or priority date.

 

Felicity Wade-Palmer:  Another defence is the first sale doctrine, also known as patent exhaustion, which allows defendants to argue that the patent holder's rights are exhausted after the first authorised sale of the patented product.

Another is the repair doctrine, this distinguishes between permissible repair of a patented item, which is allowed, and the impermissible reconstruction, which constitutes infringement.

 

Mathilde Grammont:  Other defences include claims of inequitable conduct, where the patent holder is accused of acting unethically during the patent application process, and patent misuse, which involves the patent holder using the patent to unlawfully extend their market power, that is also known as fraudulent behaviour under French law.

Felicity Wade-Palmer:  Finally, the defendant is likely to bring a counterclaim for revocation of the patent, challenging the validity of the patent itself, arguing that it fails to meet the necessary legal requirements for patentability, such as novelty or non-obviousness.

If they are successful on this, then the infringement claim falls away because the patent holder no longer has a patent to assert. It is therefore important to assess the strength of your patent before bringing a claim.

 

Mathilde Grammont:  However, there is one more string to the patent holder's bow. In the UK Courts and the UPC, the patent holder can apply for conditional patent amendments in the case that the patent as granted is found invalid. With that these amendments are subject to court approval and must not introduce new matter or extend the scope of the original patent.  This is not possible anymore before French Courts, where patent amendments are only acceptable if filed at the Patent Office but it can be done while the litigation is actually pending.

OK, so now what’s next?

Felicity Wade-Palmer:  In the UK, once all the pleadings have been filed, including the defence, any counterclaim and defence to counterclaim and replies, the next stage is a case management conference (CMC).

This hearing helps streamline the process and ensures that both parties are prepared for trial. The court sets a timetable for the proceedings, including deadlines for any disclosure, exchange of witness statements, and expert reports.

 

Other issues may be discussed such as whether a confidentiality club is needed to maintain the confidentiality of certain information.  For example, confidential information may be shared with the other side's external lawyers only and not with the opposing party itself.

 

Mathilde Grammont:  There is a similar hearing in the UPC called the interim hearing. During this interim conference, which is a videoconference, several key activities take place.  The judge-rapporteur may order the parties to provide further clarification on specific points, answer specific questions, produce any additional evidence needed (although this tends to be very limited), or lodge specific documents. This helps ensure that both sides are fully prepared for the main hearing, which organisation and duration is also discussed at this interim hearing.

Felicity Wade-Palmer:  In the UK, following the CMC, the parties may disclose relevant documents and information, and exchange experts and fact witness evidence.  Expert witnesses explain technical aspects relating to the validity and infringement of the patent.  Fact witnesses provide firsthand accounts of events and tend to be less common in straightforward patent disputes in the UK due to the nature of the evidence and it is at this stage that conditional patent amendments may be proposed so they can address validity issues raised by the defendant.

Mathilde Grammont:  In the UPC, the next steps are the trial itself. In France, CMC happens every two to three as there is no calendar which is set for the whole proceedings when the case is initiated. Generally, the CMC coincides with a deadline for one party or the other to file its brief and supporting evidence. The French judge can, generally at one party's request, injunct a party to produce additional evidence or deal with some procedural issues.

Felicity Wade-Palmer: Depending on the complexity of the case, a UK patent trial for a single patent usually lasts between a couple of days in IPEC to a week in the High Court (although it can be longer for particularly complex technology).

Mathilde Grammont:  In France, the trial typically lasts half a day, and in very rare cases, one full day. Cross examination of witnesses and experts do not take place and only the external counsel argue. Before the UPC, the trial can last one up to two days.

Looking to the judgment now, what is this all for, what relief can the courts order?

Felicity Wade-Palmer:  When a court finds a patent valid and infringed, it can issue several types of orders to remedy the situation. One common order is an injunction, preventing the infringer from continuing their infringing activities.

Often this is the key objective for a patentee because it will stop the harm occurring for the remainder of the life of the patent (which could be up to 20 years). The court can also order the delivery up or destruction of the infringing goods, ensuring that the infringing products are removed from the market.

 

Mathilde Grammont:  The court may also award monetary damages to compensate the patent holder for the infringement. These damages can include lost profits or an account of the profits made by the infringer.  The approach to damages will depend on the characteristics of the patentee.  If it can point to sales lost to the infringing product then the Court will take that into account in assessing the measure of damages. Similarly, if a company licenses its patent, then the Court can assess damages by reference to what it considers to be a reasonable royalty. Alternatively, the Court will consider the notional royalty that should have been paid for the patent if licensed.  In France, this notional royalty will always be higher to reflect damages.

Felicity Wade-Palmer:  Additionally, the court might order the infringer to pay the patent holder's legal costs although the amount ordered might be capped depending on the court as mentioned earlier.  In the UK, even if the amount is not capped then the amount that can be recovered is likely to be limited to around 60-70% of the patentee's total spent in most cases.

Mathilde Grammont: In France, the amount is not capped, French Court generally award a lower portion, which will be set on an equitable basis. The UPC awards to the successful party an amount which is capped based on the value of the case. These remedies aim to restore the patent holder's rights and deter future infringement.

Felicity Wade-Palmer: In most extreme situations, the claimant can also apply for emergency measures, called preliminary injunctions or PIs. The UPC can order PIs either on an ex-parte (where the defendant does not have an opportunity to argue its case) or on an inter partes basis (where it does). In France, although courts can theoretically order PIs on an ex-parte basis, it is extremely rare; they are almost always ordered inter partes.

Mathilde Grammont: Before both courts, the applicant will have a certain time period to act on the merits (if the action on the merits is not already pending), otherwise the effect of the PI will lapse or could be revoked upon request from the defendant.

Overall, it takes three up to six months for a PI to be ordered by the Paris Court, and can take between one week to three months before the UPC, especially when the adverse party is not heard.

 

Felicity Wade-Palmer:  Before the UPC (and German courts), there is a very useful mechanism which makes it possible for the defendant to anticipate both PI and saisies requested on an ex-parte basis, by filing what is called a protective letter. It is basically a defensive brief recorded in advance by the defendant who considers that it's likely that an application for PI or saisie will be filed against it. Protective letters are kept secret by the registrar for six months, which can be extended several times, in consideration of a court fee.  We at Gowling can help you with this.

Mathilde Grammont: Once an application for PI or saisie is actually filed, the protective letter will be forwarded to the applicant and to the panel in charge. The protective letter will then be taken into consideration leading to an oral hearing gathering both parties.  In France and in the UK, PIs cannot be anticipated by protective letters though.

Felicity Wade-Palmer: In fact, PIs in patent infringement cases are not granted frequently in the UK. The courts apply a stringent test, considering factors such as whether there is a serious issue to be tried, the balance of convenience, and whether damages would be an adequate remedy. The relatively low frequency of PIs reflects the high threshold that must be met for their issuance.

Mathilde Grammont: Now let's assume the long-awaited decision is finally issued.  What do you do if the judgment is not quite what you expected? Either because the patent is held invalid, or no infringement was found. In France and before the UPC, appeal is available for both PI and decisions on the merits.  Decisions are appealable without any condition except a time limit.

Felicity Wade-Palmer:  In the UK, you must first obtain permission to appeal.  Initially, the party seeking to appeal must apply for permission from the court that issued the original decision. The application must demonstrate that the appeal has a real prospect of success or that there is some other compelling reason for the appeal to be heard.

If the lower court denies the permission, the appellant can then seek permission directly from the Court of Appeal. The Court of Appeal will review the application and decide whether to grant permission based on similar criteria, the likelihood of success and the presence of compelling reasons.

Mathilde Grammont:  Finally, it is important to note there is a very strong incentive to try to settle patent infringement cases through alternative dispute resolution ways.  It has the advantage of being generally cheaper and faster.

Felicity Wade-Palmer:  In the UK, parties involved in patent infringement actions have a duty to consider alternative dispute resolution (ADR) methods before resorting to litigation. The courts encourage the use of ADR, such as mediation or arbitration, to resolve disputes efficiently and amicably and legal teams are required to remind litigants of these options. This duty aligns with the overriding objective of the Civil Procedure Rules, which aim to deal with cases justly and proportionately.

Mathilde Grammont:  Before French Courts, your writ of summons just has to demonstrate that you actually tried to negotiate, but this is not a serious obligation. Paris Judicial Court is very keen on mediation in, particular and will often injunct parties to meet with a mediator, which can lead later on to proper mediation.

Felicity Wade-Palmer:  There is no such power granted to judges at the UPC, but ADR is also soon to be available and strongly recommended through the administrative intermediary of the PMAC, which is not yet operational.

Mathilde Grammont: As we wrap up today's episode, let's summarise the key takeaways from our discussion on patent litigation in the UK, France, and the Unified Patent Court.

Felicity Wade-Palmer: Absolutely, Mathilde.

Across all Courts, you can bring a claim for patent infringement if you are the patent holder and usually if you are an exclusive licensee.

 

You may also be able to bring a claim as a non-exclusive license holder.

 

You must bring your claim within five years (six in the UK) of when you became, or should have been, aware of the relevant infringing acts.

 

Mathilde Grammont: And if you act quickly enough (i.e. within a few months of discovering the infringement), you may in certain circumstances be able to obtain a PI – particularly before the UPC and French courts. The UPC allows for PIs on an ex-parte basis which can be ordered in a very short time frame. French courts generally only grant PIs on an inter partes basis. In the UK, PIs are technically available but hard to obtain in most cases.

Felicity Wade-Palmer: Before filing an action in the UK, it is important to write a letter before action, allowing the defendant time to respond. Ensure that the letter is carefully drafted to avoid the risk of an Unjustified Threats claim.

Before all courts, it is important to gather evidence before you make your claim but note that the UPC and French Courts require a front loading of evidence and arguments.

 

Mathilde Grammont: When it comes to final judgments, all courts offer similar remedies when it comes to the infringing products. However, note that the amount you can claim for damages or claim back in legal fees depends on which Court you are before. This is likely to have an impact on which court you will bring your claim before and the strategy you employ throughout proceedings.

Felicity Wade-Palmer: So, in summary, while the UK, French, and UPC courts have different procedures and focuses, they all aim to ensure efficient and fair resolution of patent disputes. The UPC is a relatively new court. Its case law is developing around its jurisdiction and ability to grant injunctions in countries outside the UPC. Watch this space.

Mathilde Grammont: That is it from us. Thank you for listening and we hope you found this discussion insightful. If you have any questions, please feel free to get in touch.

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