Circuit Test

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OCTOBER 2015 OCTOBER CHALLENGE OCTOBER 2015 • ISSUE 253 IN CHINA

ARE BRAZIL’S LAWS READY FOR 3D PRINTING?

THE INSIDE STORY OF A MOCK UPC TRIAL

US CIVIL PROCEDURE CHANGES EXPLAINED

CIRCUITHOW THE COURT OF APPEALS TEST FOR THE FEDERAL CIRCUIT IS CHANGING

PLUS: WHY GUIDANCE IS NEEDED ON PATENT ELIGIBILITY

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THE MONTH ONLINE

What’s hot on Twitter this month Follow @managingip on Twitter for all the latest IP news and comment. Here’s a selection of what readers have been saying over the past few weeks. WEBINARS Tangible IP UK at No 2 is a hoot. We have a great innovation ecosystem but it does not mean we are great at Listen again to our latest webinars using it. 1/2

Lee Curtis Indeed decision All Managing IP’s webinars are available to listen and view again online, including two held in the past month: much more nuanced than • Mad about Madrid: How to leverage Madrid Protocol to your best advantage painted in article. Still think • IP Stars research – your questions answered registration will be rejected. We will see. All our webinars are free to listen to once you are registered and last about an hour. You can also view the slides and the results of audience polls. Rosa Wilkinson How are we getting on with China? Find out more: managingip.com/Web-Seminars @The_IPO’s Adam Williams spills the beans in this interview with @ManagingIP http://bit.ly/1OgIO41

Brooks Kushman @BrooksKushman senior attorney Hope Shovein will present during the @ManagingIP Luxury Brand & Retail Forum on September 23 in London

swaraj barooah Congrats to Shamnad Basheer on being chosen as one of @ManagingIP’s top 50 STORIFY influential people in IP!

Scott McKeown While motion for sanctions pending, takes up bad mouthing the Board. Silly All the analysis of the Kit Kat judgment man #PTAB. #patent. in one place Carpmaels Pharma Agreed, lots of interesting points, There was a lot of reaction on Twitter to the Court of Justice of the EU’s judgment in the case between including a plea for a better Nestlé and Cadbury over the shape of the Kit Kat chocolate bar. system at the end of Arnold’s judgement (722ff) We have collected some of the tweets mentioning the decision, and linking to further analysis, in a page on Storify.

Jim Boff So research into IP The tweets include news reports in various media, commentary from law firms and individuals and pre- might promote innovation? I dictions about the likely outcome when the case returns to the High Court in London. see intensive navel-gazing at applicant expense. Read here: storify.com/ManagingIP

JOIN THE CONVERSATION ON TWITTER, LINKEDIN, FACEBOOK AND THE MANAGING IP BLOG facebook.com/managingip @managingip managingip.com/blog

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Among the topics addressed on Managing IP’s online blog in the past INCORPORATING IP ASIA few weeks are: Kyle Bass and the PTAB, evidence in IP policy making and last month’s cover story on the seven factors disrupting Euromoney Trading Limited 6-8 Bouverie Street IP practice London, EC4Y 8AX Tel: +44 20 7779 8682 Fax: +44 20 7779 8500 Email: [email protected]

Kyle Bass to return to “kangaroo court” SUBSCRIPTIONS Email: [email protected] If Kyle Bass has been put off by the PTAB denying three of his IPR petitions, he’s UK Hotline Tel: +44 (0) 20 7779 8999 not showing it. He has filed a further nine petitions since the Coalition for Afford- Fax: +44 (0) 20 7779 8300 able Drugs’ first setback and has labelled the PTAB a kangaroo court US Hotline Tel: +1 212 224 3570 It has been a bad couple of weeks for hedge fund manager Kyle Bass’s efforts to get Fax: +1 212 224 3671 pharmaceutical companies’ patents invalidated. The Patent Trial and Appeal CUSTOMER SERVICES Michael Loney Board has denied three of the Coalition for Affordable Drugs’ petitions – two Tel: +44 (0) 20 7779 8610 Americas editor challenging patents covering Acorda’s Ampyra drug and one covering Biogen’s EDITORIAL Tecfidera treatment. Managing editor James Nurton Americas editor Michael Loney Bass is not taking it lying down – he has slammed the Board and USPTO director Washington DC editor Peter Leung Michelle Lee while continuing to file inter partes review petitions. MIP Chinese edition Stephy Tang PRODUCTION READ MORE: managingip.com/PTAB Production editor Luca Ercolani Web production editor Josh Pasanisi

ADVERTISING Group publisher Tom St Denis Publisher Alissa Rozen EMEA manager Nick Heath Show us the evidence! North Asia manager Matthew Siu South Asia manager Daniel Boland Increasingly, and rightly, policy-makers demand evidence about the impact Marketing Leanne Fitzpatrick proposed changes will have. Why is it so rarely forthcoming? Divisional director Greg Kilminster

The EU Digital Single Market (DSM) was the topic of a seminar held by the FOR MORE DETAILS GO TO Westminster Media Forum. As readers who have been following European is- www.managingip.com/Contact-Us.html sues will know, the DSM is a set of proposals by the EU Commission designed James Nurton to promote the development and spread of digital technology across national Managing editor borders in Europe. Managing director Christopher Fordham Chairman Andrew Rashbass The Commission’s initial thoughts were aired in a communication in May, and Directors Sir Patrick Sergeant, since then we have been in what one lawyer described to me as “a phoney war”, The Viscount Rothermere, Christopher before concrete legislative proposals are published, probably by the end of this year. Fordham (managing director), Neil Osborn, Dan Cohen, John Botts, Colin Jones, Diane Alfano, Jane Wilkinson, Martin Morgan, READ MORE: managingip.com/evidence David Pritchard, Bashar AL-Rehany, Andrew Ballingal, Tristan Hillgarth © Euromoney Trading Limited 2015 The copyright of all editorial matter appearing in this magazine is reserved by the publisher. No matter contained herein How IP practice is changing may be reproduced, duplicated or copied by any means without the prior consent of the How might your work change in the next 10 years? Or 20 years? With daily dead- holder of the copyright, requests for which lines and clamorous clients, most IP practitioners probably don’t have the luxury should be addressed to the publisher. to predict the future. But maybe that’s exactly what you should be doing No legal responsibility can be accepted by Euromoney Trading Limited or Managing Intellectual Property for the articles which In an article just posted online (and printed as the cover story in the September appear in this publication. issue), Emma Barraclough discusses seven trends that are disrupting the IP market Printed in the UK by Buxton Press, Emma Barraclough – from technology to globalisation via cost pressures, the changing demands on Buxton, UK Group editor in-house counsel and the emergence of new competitors. ISSN 0960-5002 Managing Intellectual Property is published READ MORE: managingip.com/disruptors 10 times a year for $2,800 per year by Euromoney Trading Limited.

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NEWS ROUNDUP

EU Court of Justice provides guidance on shape marks in Kit Kat case An applicant for a trade mark based on acquired distinctiveness must prove that that mark alone (as opposed to any other mark present on the product) identifies the origin of the goods or services, according to the CJEU. In its judgment in the dispute between Nestlé and Cadbury over the shape of the Kit Kat bar, the Court answered three questions referred from the England and Wales High Court, arising from an appeal from an opposition against Nestlé’s UK trade mark application. READ MORE: managingip.com/KitKat

US Business method applications fall 52.4% post-Alice Managing IP analysed figures for USPTO applications in patent class 705, the class covering “data processing” in which most business method patents are placed. Patent applications in class 705 not only plummeted after the Alice decision in June 2014, but have kept tumbling. Some 8,620 class 705 patent applications were filed in the 12 months between July 1 2013 and June 30 2014. In the same period 12 months later, after Alice, the figure was 4,106 – a 52.4% drop. READ MORE: managingip.com/Alice

CHINA Concerns over criminal enforcement Criminal enforcement is an important tool for IP owners in China, but Professor Huang Wushuang of East China University of Political Science and Law said that calls to make it easier to start criminal enforcement proceedings may be unwise. He argued there may be unintended consequences in lowering the value threshold required to bring a case. Huang was one of several panellists speaking at Managing IP’s Global IP & Innovation Summit last month in Shanghai. READ MORE: managingip.com/Shanghai

US Laches a viable defence in patent cases – Federal Circuit Citing concerns about “stale” patents, the Federal Circuit has ruled, en banc, that laches is a statutory defence in the Patent Act and may be a defence to both legal and equitable remedies. The ruling in SCA Hygiene Products v First Quality Baby Products comes after the Supreme Court’s ruling last year in Petrella v MGM, which held that laches cannot be invoked in a copyright claim since the Copyright Act already had a statute of limitations. The decision found that Congress statutorily provided for a laches defence in the Patent Act to exist alongside the statute of limitations. READ MORE: managingip.com/laches

UK Warner-Lambert suffers Swiss-type pain Following the guidance from the Court of Appeal, Mr Justice Arnold has ruled that some of the claims of Warner- Lambert’s second medical use patent for the drug pregabalin are invalid, and that Actavis has not infringed two claims directed to the use of pregabalin. The basic patent, SPC and data exclusivity for pregabalin have lapsed, but Warner-Lambert still had a second medical use patent with Swiss-type claims directed to its use in the preparation of a medicament for treating pain and neuropathic pain. READ MORE: managingip.com/Swissclaims

US Ninth Circuit rules in dancing baby copyright case The Court of Appeals for the Ninth Circuit appeals court has affirmed that copyright holders must consider whether a use of material is fair before sending a takedown notice, in the closely watched Lenz v Universal “dancing baby” lawsuit. In 2007 Stephanie Lenz posted a 29-second video to YouTube of her children dancing in her kitchen to the Prince song “Let’s Go Crazy” playing in the background. Universal Music Group sent YouTube a notice under the Digital Millennium Copyright Act (DMCA), claiming that the video infringed the copyright in Prince’s song. READ MORE: managingip.com/dancingbaby

AUSTRALIA Crestor patent invalid down under Australia’s High Court has upheld a ruling by the lower courts that AstraZeneca’s patent for rosuvastatin (which it sells as Crestor) is invalid for lacking an inventive step. In unanimous but separate opinions, the High Court judges found that the claimed invention was obvious in the light of the common general knowledge and the prior art submitted. An obviousness challenge to the US patent for rosuvastatin failed in the US District Court for Delaware in 2010 and AstraZeneca subsequently signed a deal with Watson Pharmaceuticals. READ MORE: managingip.com/Crestor

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MOVES ROUNDUP

Managing IP is hiring!

Managing IP is seeking to appoint a report/editor to work in our head office in London, UK.

We are interested to hear from applicants from diverse backgrounds, in particular those with experience of reporting and editing and/or knowledge of intellectual property.

Responsibilities include writing news and analysis, conducting interviews, editing articles, developing new editorial projects and hosting events. Applicants must be eligible to work in the UK, but some international travel will also be necessary.

For more information, and to apply, visit managingip.com/hiring

AMERICAS Patrice Jean has joined Hughes Hub- Margaret Focarino, bard & Reed as a partner in New York. former commissioner She was previously a partner at Kenyon for patents for the & Kenyon. USPTO, has joined Oblon McClelland Jane Love and Robert Trenchard EUROPE Maier & Neustadt as a senior patent have joined Gibson Dunn & Crutcher’s UK- adviser. New York office as partners practising based IP and life sciences litigation. They were firm E Patrick Ellisen has previously partners with Wilmer Hale. HGF moved to Orrick’s Sili- has con Valley office as a Trade mark and opened in The Hague. The new office partner, focusing on copyright specialist will be its 11th in total and first in conti- representing Taiwanese Lisa Martens has nental Europe. It will be led by Achim companies in US litigation. joined the Del Mar, Krebs, a patent attorney who was pre- California office of viously a partner of Haseltine Lake. The A team of six lawyers Sheppard Mullin Richter & Hamp- firm has also added Rachel Fetches led by Brian J Win- ton as a partner. She joins from Fish as a partner in its London office. She terfeldt has joined & Richardson. joins the litigation practice and was pre- Mayer Brown from viously with Bird & Bird. Katten Muchin Rosen- Foley & Lardner has added Mark man. Winterfeldt will be based in the Danielson as a partner in the Silicon Vossius & Partner will open an office Washington DC and New York offices Valley office. He was previously a part- in Düsseldorf on November 1, its and will be co-leader of the firm’s ner at Pillsbury Winthrop Shaw fourth office in the region. It has hired global brand management and internet Pittman. lawyer Kai Rüting as a partner from practice. Jones Day, where he was European Patent litigator John counsel. Elisa Cooper has Gresens has joined joined Lecorpio as vice Akerman’s Chicago of- V.O. has opened an office in Amster- president of marketing. fice as a partner from dam, its 10th office in the Netherlands, She was previously vice Troutman Sanders. Belgium and Germany. The new office president, product mar- will have seven patent attorneys keting at MarkMonitor. Jennifer Fraser has joined Dykema’s IP practice group in Washington DC. Grigory Ivliyev has been named as David Newman has joined Gould & She was previously co-chair of Novak the new head of Rospatent, the Russian Ratner as chair of the IP group. He was Druce Connolly Bove + Quigg’s IP office. He succeeds Boris Simonov formerly with the Chicago office of national trade mark and copyright and was previously deputy minister of Loeb & Loeb. practice. culture.

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How changes to civil procedure rules will affect patent litigation

Amendments to the US Federal Rules of Civil Procedure are set to take effect on December 1 and will affect issues such as discovery and document production. Jeff Totten and Robert MacKichan look at the implications for patent cases

he amended Federal Rules of Civil Procedure contain multiple changes that may impact district court litigation. Of particular interest to patent litigators, the MINUTE amended rules redefine the scope of discovery, the re- READ quirements for objecting to document requests, and 1 the rules governing the preservation and loss of elec- tronicallyT stored information in the United States. The rules Barring an unlikely intervention emphasise the concept of proportionality as a throttle on dis- from Congress, a series of amend- covery, a change that will likely play a prominent role in discov- ments to the Federal Rules of Civil ery disputes, but may not drastically affect the scope of Practice and Procedure will take ef- production in patent cases involving sophisticated corporate fect on December 1 2015. The parties and high stakes. Rules requiring more specific objections amendments, promulgated by the to document requests aim to reduce uncertainty regarding the Supreme Court based on the recom- completeness of document productions, but may lead to more mendations of an Advisory Commit- disputes about the adequacy of written responses in patent law- tee of the Judicial Conference of the suits. Further, until the courts elucidate the meaning of the United States, seek to advance coop- newly recited requirement that “reasonable efforts” be taken to eration among parties, proportional- preserve electronically stored information, many parties may ity in discovery procedures, and opt for a conservative approach to the retention of electronic early judicial case management and documents. Thus, while parties and practitioners should be have the potential to change parties’ aware of changes in the mechanics and timing of discovery re- approaches to discovery in patent lit- quests and responses introduced by the rule amendments, clar- igation. The changes introduced by ity on the impact on patent litigation may take time to the rules package affect matters in- materialise. cluding the scope of discovery; costs; document production; electronically stored information; and Discovery scope form pleadings. Whether the changes will achieve their aims will The amendments to Rule 26 introduce two substantive become evident once they start to changes to the scope of discovery that will likely be of interest be applied from December. to parties involved in patent litigation. First, the amendments incorporate the concept of “proportionality” into the definition

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Scope of discovery Rule 26(b)(1)

Abrogation Discovery cost of forms shifting Rule 84+ Rule 26(c)(1)(B)

Timing of Responses to document requests document requests Rule 26(d)(2)(A) Rule 34(b)(2)(B)

of permissible discovery. Second, they eliminate the familiar re- the case. According to the Advisory Committee, the purpose frain that permissible discovery need not be admissible at the of this change is to address discovery overuse by making pro- trial, so long as it “appears reasonably calculated to lead to the portionality an express component of the scope of discovery. discovery of admissible evidence”. We explore these changes, the Advisory Committee’s reasons for making them, as well as In its comments, the Advisory Committee notes that discovery their possible impact, in turn. is technically already subject to proportionality limitations, as current Rule 26(b)(1) recites that “[a]ll discovery is subject to the limitations imposed by Rule 26(b)(2)(i), (ii), and (iii)”, Proportionality which provide proportionality-based factors warranting the grant of protective orders. Moreover, Rule 26(g) provides that First, amended Rule 26(b)(1) incorporates a proportionality a lawyer’s signature on a discovery request or response consti- requirement directly into the definition of the scope of tutes certification that it is not unduly burdensome in view of discovery: these factors. But by transferring the proportionality factors into the definition of discovery scope, and by expressly reciting the Parties may obtain discovery regarding any nonprivileged term “proportional,” the Committee intended to reinforce the matter that is relevant to any party’s claim or defense and pro- parties’ obligation to consider the factors and “to encourage portional to the needs of the case … judges to be more aggressive in identifying and discouraging discovery overuse”. Under this revision, information is discoverable if it is relevant to a party’s claim or defence and is proportional to the needs of Proportionality is defined under the amended Rule by importing the factors governing the grant of protective orders of current Rule 26(b)(2)(C)(iii): (1) the importance of the issues at stake in the action, (2) the amount in controversy, (3) the par- The amendments to Rule 26 introduce ties’ resources, (4) the importance of the discovery in resolving the issues, and (5) whether the burden or expense of the pro- two substantive changes to the scope of posed discovery outweighs its likely benefit. An additional factor is also introduced by the amendment, adding consideration discovery that will likely be of interest to of “the parties’ relative access to relevant information”. This addition, the Advisory Committee states, reflects the “reality that parties involved in patent litigation some cases involve an asymmetric distribution of information” where “one party must bear greater burdens in responding to discovery than the other party bears”.

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The impact of Rule 26(b)(1)’s revised definition will most likely be felt in the manner in which parties and courts discuss discovery disputes. It can be expected that proportionality will We can expect increased reliance on find renewed use in discovery objections. Instead of arguing over whether the discovery is “unduly burdensome” or “reason- the opinions of information technology ably calculated to lead to admissible discovery”, future challenges will focus on whether the discovery is “proportional” to or e-discovery experts to provide the case. estimates of document searching and What must remain to be seen is whether the revised rule will production costs impact the amount and type of discovery exchanged. The Ad- visory Committee suggests that the change should not alter existing discovery obligations:

[Moving] the proportionality calculation to Rule 26(b)(1) rule may have less impact than in other areas of the law. De- does not change the existing responsibilities of the court pending on the facts of the case, the parties involved, and and the parties to consider proportionality, and the change the amount in controversy, it may be difficult to argue that does not place on the party seeking discovery the burden the burden of providing information outweighs its of addressing all proportionality considerations. importance.

Nor is the change intended to permit the opposing party to re- To challenge a discovery request on proportionality grounds, fuse discovery simply by making a boilerplate objection that it it may be necessary to provide evidence of the burden of the re- is not proportional. The parties and the court have a collective quested discovery. Demonstrating facts showing the discovery responsibility to consider the proportionality of all discovery is not proportional to the needs of the case will make a chal- and consider it in resolving discovery disputes. lenge more likely to succeed. As such, we can expect increased reliance on the opinions of information technology or e-dis- In patent cases, which often involve high-stakes claims and covery experts to provide estimates of document searching and at least one well-resourced party, the modification of the production costs.

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Factors for • The importance of the issues at stake determining • The amount in controversy whether • The parties’ relative access to information discovery is • The parties’ resources “proportional to • The importance of the discovery the needs of the • Whether the burden or expense of the discovery outweighs its likely benefit case”

Rule 26(b)(1) (as amended)

“Reasonably calculated to lead” protective orders. Including this authority directly in the rules may increase the frequency of discovery disputes being resolved A second significant change to Rule 26(b)(1) eliminates the by ordering discovery at the requestor’s expense. Where the commonly recited phrase that “[r]elevant information need to parties have disproportionate resources or discovery requests not be admissible at the trial if the discovery appears reasonably lie at the edges of relevancy, for example, courts may shift costs calculated to lead to the discovery of admissible evidence”. As to the party seeking discovery. The Advisory Committee urges, the Advisory Committee notes, this “reasonably calculated” lan- however, the amendment “does not imply that cost-shifting guage is often relied on as defining the scope of discovery – a should become a common practice” and the responding party practice never intended under the rules. Instead, according to should ordinarily bear the costs of responding. Time will tell the Advisory Committee, the phrase was simply meant to clar- how often courts employ this provision. ify that inadmissibility is not a basis for opposing discovery of information otherwise within the scope of discovery. Amended Rule 26(b)(1) replaces the deleted phrase with the statement Document production that “[i]nformation within the scope of discovery need not be admissible in evidence to be discoverable”. Specificity of objections

At the very least, removal of the “reasonably calculated” language Amended Rule 34 adds two requirements for objecting to re- will change the standard recited to address the scope of discov- quests for production of documents. According to the Advisory ery in many cases. A recent search of patent dockets returned Committee, these two new requirements are “aimed at reducing over 50 orders since January 2014, either denying motions for the potential to impose unreasonable burdens by objections to protective orders or granting motions to compel, that recite the requests to produce”. “reasonably calculated” standard in some fashion. Indeed, as the Advisory Committee describes, comments opposing the pro- First, amended Rule 34(b)(2)(B) mandates that objections to posed change complained that it would eliminate a “bedrock” requests for production be stated “with specificity”: definition of the scope of discovery. This, the Advisory Com- mitted reasoned, reflects “the very misunderstanding the For each item or category, the response must either state that amendment is designed to correct”. What must remain to be inspection or related activities will be permitted as requested seen is whether dropping the phrase will increase focus on rel- or state with specificity the grounds for objecting an objection to the evance and proportionality in view of broad discovery requests. request, including the reasons.

The Advisory Committee explains that while an objection may Shifting the costs of discovery state that a request is overbroad, the objection must identify any scope of the request that is recognised to be appropriate. An ex- The proposed amendments to Rule 26(c)(1)(B) expressly ac- ample objection, according to the Advisory Committee, would knowledge the court’s authority to allocate expenses through be “a statement that the responding party will limit the search

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to documents … created within a given period of time prior to the events in suit, or to specified sources.” Current Rule 33(b)(4), covering objections to interrogatories, already con- Although the requirement for tains a specificity requirement. The Advisory Committee intended the amendment to Rule 34 to clarify that less-specific specificity in objections is arguably objections to document requests are improper. new, it should not be an Second, amended Rule 34(b)(2)(C) requires that “[a]n objection must state whether any responsive materials are being with- insurmountable held on the basis of that objection”. Through this change, the Advisory Committee aimed to address the situation where a party states several objections, but still agrees to produce documents, leaving the requesting party uncertain whether any documents are being withheld based on the objections. The accompanying document requests. This will, no doubt, provide Advisory Committee does not contemplate objections with a fertile ground for discovery disputes testing the true extent of detailed description or log of all documents withheld, but re- the objection requirements. We can also expect disputes regard- sponses “to alert other parties to the fact that documents have ing document production to occur earlier in the case. Finally – been withheld and thereby facilitate an informed discussion of and perhaps as intended by the rule – specific objections may the objection”. As with the requirement of specificity, the Advi- frame disputes more discreetly than general, blanket objections sory Committee explains that a response stating the limits ap- permissible under the current rules. plied in searching for documents would qualify as a statement that the materials have been “withheld”. Although the requirement for specificity in objections is arguably new, it should not be an insurmountable. According to By focusing on the content of written responses to document the Committee Notes, adequate specificity and identification requests, the Advisory Committee’s changes could actually lead of whether materials are being withheld can be achieved by de- to more discovery disputes in patent litigation. Instead of focus- scribing any limits applied in searching for responsive docu- ing on the documents actually produced, some parties may in- ments. Many litigators will likely not be eager to disclose the stead argue about the adequacy of the written responses strategy used to identify relevant materials. Balancing the

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Responses to requests for production under amended rule 34

State “whether any State grounds for responsive materials are Specify a “reasonable time” objection “with specificity” being withheld on the for production basis of [the] objection”

protection of attorney work product with the rules specificity served until the day of the scheduling conference, providing requirement may prove tricky. them earlier will not mean that responses will be received earlier. If it is expected that a particular request will be troublesome, it may be advantageous to serve it before the conference so that Time for responding the parties may confer. On the other hand, the requestor may not know if a true dispute exists until the time for response has A further amendment to Rule 34(b)(2)(B) requires that doc- come – 30 days after the Rule 26(f) conference. ument productions “be completed no later than the time for inspection specified in the request or another reasonable time specified in the response”. Parties are often reluctant to commit Failure to preserve ESI to a date certain for the completion of document production, reserving the right to supplement productions throughout dis- Attempting to address differences in the way in which courts covery. The requirement of specifying a “reasonable time” is yet react to the loss of electronically stored information (ESI), the another requirement that may lead to disputes, especially in Advisory Committee rewrote Rule 37(e). The proposed rule cases involving parties holding large collections of potentially eliminates the safe harbour provision of existing rule 37(e), relevant documents. which now states that:

Absent exceptional circumstances, a court may not impose Early discovery requests sanctions under these rules on a party for failing to provide electronically stored information lost as a result of the routine, As amended, Rule 26(d)(2)(A) allows for delivery of docu- good-faith operation of an electronic information system. ment requests before the parties’ Rule 26(f) scheduling conference. The requests can be delivered as early as 21 days after In place of this good-faith safe harbour, amended Rule 37(e) the service of the complaint, irrespective of the timing of the introduces a framework for applying corrective action where scheduling conference. The requests are then considered to be electronically stored information that should have been pre- served at the first Rule 26(f) scheduling conference, making reserved in the anticipation or conduct of litigation is lost because sponses due 30 days after the conference. The Advisory Com- a party failed to take “reasonable steps to preserve it”, and it can- mittee’s stated purpose for this change is to facilitate discussion not be restored or replaced through additional discovery. regarding the scope of discovery during the Rule 26(f) scheduling conference. The Advisory Committee contemplates that The corrective action permitted under the amended rule hinges such discussions may lead to changes to the requests. on whether loss of the ESI resulted from an intentional act attempting to avoid discovery. In particular, subdivision 37(e)(1) In practice, the impact of this rule will depend on how com- provides that “upon finding prejudice to another party from loss monly it is invoked. Since the requests are not considered of the information”, without regard to intent, the court may

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US CIVIL PROCEDURE RULES

order measures “no greater than necessary to cure the prejudice”. But where there is “a finding that the party acted with the intent to deprive another party of the information’s use in the litigation”, subdivision 37(e)(2) authorises an adverse-inference in- If the application of a new rule would not struction or dismissal of the action – measures the Advisory Committee describes as “very severe”. be feasible or would lead to injustice, a

According to the Advisory Committee’s comments, amended party can move the court for relief Rule 37(e) aims to address “the continued exponential growth in volume” of electronically stored information in litigation. In- stead of attempting to define the trigger, scope and duration of a preservation obligation, the amended rule relies on the standard developed in case law – that a duty to preserve information arises when litigation is “reasonably anticipated” – and appended to the Federal Rules suffice under the rules. Form focuses on standardising the framework for responding to a 18 provides a sample complaint for direct patent infringe- failure to preserve ESI. As noted by the Advisory Committee, ment, which the Federal Circuit has found sufficient to de- the federal circuit courts of appeal have established signifi- feat a motion to dismiss under Rule 12(b)(6). With respect cantly different standards for imposing sanctions or curative to allegations of infringement, Form 18 merely requires a measures for failure to preserve electronically stored informa- statement that the defendant has been infringing the patent tion, some permitting the severe adverse-inference instruction by “making, selling, and using the device embodying the sanction for the negligent loss of ESI. The Advisory Commit- patent”. tee felt this rule led to over-preservation of ESI at great costs, and sought to reduce this “primary incentive for over-preser- The Advisory Committee’s stated reasons for eliminating the vation” by limiting adverse-inference instruction sanctions to forms include the observation that the forms “illustrate a sim- cases of intentional loss of ESI. plicity of pleading that has not been used in many years” and that “the increased complexity of most modern cases have re- Although the rule does not define “reasonable steps” to preserve sulted in a detailed level of pleading that is far beyond that illus- ESI, the Advisory Committee notes that proportionality, in- trated in the forms”. cluding sensitivity to party resources, should be a factor. In addition, while the safe harbour provision of current Rule 37 has Under the Supreme Court’s rulings in Twombly and Iqbal, a been deleted, according to the Advisory Committee, “the rou- complaint must contain enough facts to state a claim for relief tine, good-faith operation of an electronic information system” that is plausible on its face such that, accepting all factual alle- should still factor into the analysis of whether the party took gations as true, a court may draw the reasonable inference that “reasonable steps” to preserve ESI. The Advisory Committee that the defendant is liable for the misconduct alleged. In view also emphasises that, under the amended Rule, sanctions are of the deletion of form 18, as well as the Advisory Committee only appropriate where lost information cannot be restored or comments, courts may require more detailed factual allegations obtained from other sources. If the information is restored or in direct patent infringement pleadings to pass muster under replaced, no further measures should be taken. Further still, the Rule 12(b)(6). Advisory Committee warns that the serious measures listed in subdivision (e)(2) “should be applied cautiously and should not be used when the information was relatively unimportant Application of the amendments or lesser measures would be sufficient to redress the loss”. If, as expected, Congress does not intervene, the amendments The impact of these changes on parties anticipating patent liti- to the Federal Rules will take effect on December 1 2015. The gation remains unclear. Although amended Rule 37(e) limits new rules will apply to all pending cases, including those filed application of adverse inferences and default judgments for fail- before December 1; however, if the application of a new rule ure to preserve ESI, other corrective action remains available would not be feasible or would lead to injustice, a party can where parties failed to “reasonable steps” to secure information. move the court for relief. While amendments have the potential Deletion of the express safe harbour for information lost to bring some noticeable changes to discovery proceedings in through the routine, good-faith operation of systems and the patent litigation, the true extent of their impact – and their ef- emphasis on “reasonable steps” may lead parties to better doc- fectiveness at advancing the goals of increased cooperation, pro- ument the steps taken to preserve ESI in anticipation of litiga- portionality and early judicial case management – will have to tion. Further, some parties may be hesitant to rely on the rules, be determined over time as they are applied by practitioners opting instead to bear the expense of document retention out and the courts. of an abundance of caution.

© Finnegan 2015. Jeff Totten Elimination of form pleadings is a partner, and Robert MacKichan is an associate, in A final change worth following is the abrogation of Rule 84, the firm’s Washington DC Robert which at present provides that the form complaints Jeff Totten office MacKichan

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The legal aspects of 3D printing in Brazil

The increasing popularity of 3D printing in Brazil poses several questions about IP rights, free dissemination of 3D printing and home users of the new technology. Ricardo Pinho assesses whether Brazil’s laws are sufficient to provide the answers

D printing in Brazil is becoming more and more popular. Branded or ready-to-use 3D printers for MINUTE home applications are nowadays easily found in READ the Brazilian market and can be bought online. A 1 CUBE X TRIO 3D printer, for example, is offered for sale in Brazil for approximately $5,000 and, al- 3D printing will pose new chal- 3though it is not a professional model, is capable of printing three lenges for the consumer goods in- colours items as big as a basketball. dustry in Brazil, including whether the country’s laws are capable of protecting IP rights in new environ- The source of the controversy ment. The laws relating to patents, industrial design registrations, trade Many authors have indicated that 3D printing means, for tan- marks, integrated circuit topogra- gible goods, the same that digital technology meant to intangi- phies and trade dresses appear to ble assets, such as music, movies and books, and that the be adequate to protect not only the consumer goods industry will have to reinvent itself in order to rights of IP owners, but also the free face this new challenge. Some authors see 3D printing as a new dissemination of 3D printing tech- industrial revolution. nology and home users of 3D printing. But interpretation of the 3D printing certainly opens a new range of possibilities for the existing legal provisions will have to industry. As with many other inventions, this has good and bad determine the differentiation besides. tween producing and manufacturing. It will also have to define 3D printing will pose new challenges for the industry as it be- objective parameters to establish comes more popular. But from the Brazilian perspective, the the level for damages that will qual- time that it will become so popular and accessible that people ify as an unauthorised act of repro- will use it to produce goods at their end instead of buying prod- duction of a protected object, as well ucts available on the shelves is still not in the horizon. The in- as establishing the conditions for tellectual property community has some time to analyse private use. whether or not Brazil’s laws are capable of protecting IP rights within this new environment. But experience in other technology fields shows that this window will not last forever.

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The lessons taken from the “digital revolution” evidence that Brazil is not different and every time a new technology challenging popularity speeds up the process of making the technology IP rights arises, the same discussion starts over again. Normally, more accessible. More accessibility in turn makes the technol- the IP rights owners group would claim that IP laws are obsolete ogy more popular and all this process incrementally speeds up, and need to be reissued, with stronger penalties and higher fines. until a certain momentum is gained and kept. This is especially This advocacy does not properly consider significant aspects of true in relation to 3D printing technology, which started as an the discussion, such as: (i) changing laws is a very time consuming “open” technology and receives contributions from almost process, especially in Brazil; (ii) new redaction of law provisions everywhere and massively from social networking. may be not as accurate as necessary, creating room for inconsistent rulings; (iii) every time a law changes its court interpretation and After that momentum is gained, normally laws have been left precedents are lost; and (iv) more penalties and higher fines do behind and become obsolete. Most of the time, laws become not necessarily imply in better law enforcement, mainly because obsolete not because they do not provide remedies for the in- obstacles to enforcement would remain unaddressed. fringements that are taking place, but because such remedies cannot be implemented as fast as needed they lose effectiveness, In Brazil, the tendency is to jump to a conclusion that the current since issues such as jurisdiction, venue, evidence of the infringe- laws are obsolete and a new legislation is required. This is not dif- ment, cannot be easily or satisfactorily determined. ferent in relation to 3D printing and a group strongly advocates that Brazil’s legal frame is not capable to tackle infringement of IP rights There is an unwritten rule that a law that cannot be enforced will by means of usage of 3D printing. Is that true? Let us check it out. not be respected. As a consequence, development of the technology continues merely ignoring the law, and only very ran- domly a legal remedy is successfully enforced against an infringer. 3D printing infringement situations But this success, instead of motivating developers to avoid further infringing IP rights, encourages them to look for means of Use of 3D printing may occasionally result in infringement of the infringing such rights in different manners and platforms. They following IP rights: (i) patents; (ii) industrial designs; (iii) trade do not stop infringing, they simply use a different modus operandi marks; (iv) copyright; (v) software; (vi) integrated circuit topog- against which the legal remedies can hardly be effective. raphy; and (vi) trade dress. Brazil is a member country to the Paris Convention for the Protection of Industrial Property, Berne Con- At this point, two groups stand up for their positions. A group vention and Trade related Intellectual Property Aspects (WTO will defend the technology and its free use, no matter what. For Agreement). Protection of IP rights is safeguarded in the Brazilian this group, infringement of IP rights is necessary for the tech- Constitution. Besides, Brazil has in place: its Industrial Property nology to develop, popularise and benefit the community as a Law, which governs protection of patents, industrial design, trade whole. They will advocate their “right to infringe” based on ar- marks and repression of unfair competition; a Copyright Law, guments such as freedom of speech and the heritage of human which protects work of arts and follows the French system of au- knowledge. The other group will advocate that IP laws are ob- thor’s rights; a Software Law, which protects source codes of soft- solete and need to be reformulated. They will rally for new legal ware; and a law providing protection for Integrated Circuit provisions that reinforce IP rights and penalize infringements Topography. This article will not deal with copyright and software with more penalties and stronger fines. They will eventually infringement through 3D printing. claim for legal remedies that will barely respect legal principles of due process of law and rules of evidence. None of these In Brazil, patents are granted after substantial examination. A 3D groups are totally right or wrong. printed object that reproduces without the authorisation of the

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imitate it and be capable of misleading the public. This similarity It is worth asking whether using a 3D clause is not contemplated in the provisions that define the corresponding torts (it is only among those that define crimes) and printer to print a patented object will the law appears to be inconsistent in relation to this issue. be considered “producing” or Contribution to infringement of industrial design registrations is not considered a crime, but only a tort and fair use is an excuse “manufacturing” the said object solely for those acts qualified as torts. There is no fair use exception for the acts defined as crimes. Again, use is only excusable under a fair use clause when it has no commercial intent and the act does not damage the economic rights of the owner of the industrial de- patent owner a patented invention or utility model will be con- sign registration. The verbs “to produce” and “to manufacture” are sidered an infringement. Brazilian patent law establishes the cir- also used to differentiate torts and crimes in relation to industrial cumstances under which an infringing act is considered a tort design registrations, but their definitions are still omitted. and/or a crime. Torts are defined as the acts of producing, using, offering for sale, selling, importing and contributing for said acts, Trade mark registrations are granted after substantial examina- a patented object without authorisation of the patent owner. tion and trade mark rights encompass the right to use the mark Crimes are defined as manufacturing without authorisation a with exclusivity in relation to the goods and/or services covered patented product and exporting, offering for sale, selling, stocking, by registration (exception made for well-known marks) and the hiding and receiving an infringing product with economical pur- right to protect the integrity and reputation of the mark. Brazil- poses; as well as supplying material or equipment to be used to ian Trademark Law does not have provisions that qualify trade infringe a patent. According to the law, some of the acts defined mark infringement as a tort, but only the circumstances under as torts are excusable due to fair use. Acts defined as crimes against which certain acts are considered crimes. These are: to repro- a patent are not excusable under fair use provisions. In any event, duce or to imitate a registered mark in a manner capable of mis- in order to be excusable the act of reproducing a patented object leading consumers and the public; to modify the registered requires that it has no commercial purposes and does not damage mark; to import, to export, to sell, to offer for sale, to hide or to the patent owner’s economic rights over the patent. have in stock a product that reproduces or imitates a registered mark. The fair use excuses provided for in the Trademark Law It must be noticed that the law differentiates the act of producing do not appear to be applicable to a case of reproduction of a (tort) from the act of manufacturing (crime). Therefore, it is registered mark by 3D printing, except for the legal authorisa- worth asking whether using a 3D printer to print a patented ob- tion for third parties to use registered marks to indicate com- ject will be considered “producing” or “manufacturing” the said patible accessories and components for the original product. object. According to the rationale of the Patent Law, manufacturing would require production at an industrial level, consider- Again, use in commerce (and in relation to competing or similar ing the number of manufactured pieces and the continuity of goods and services) is required to characterise the infringement. the process. Production would refer to a limited number of pro- Therefore, if one reproduces a branded product using 3D print- duced pieces and occasional production. The importance of this ing for his/her own use – and not to sell or to offer for sale – differentiation – besides the fact that it qualifies either as a tort there will be no infringement. But what if said product is 3D or as a crime – lacks relevance when the object is 3D printed to printed in significant quantity and freely distributed to potential be sold, because reproducing a patented object with economic consumers of the original product? There is no “commercial” intention is defined as patent infringement by Brazil’s Patent Law. intent, but the economic rights of the trade mark owner are apparently damaged. Can the trade mark owner claim that such It is also worth mentioning that supplying of CAD ou 3DPDF files use is diluting the mark and stop the printing of 3D copies? This to be used to 3D print patented objects can be considered contri- question is still to be answered by judgment of real court cases. bution to patent infringement and as such, both a tort and a crime. Topography of integrated circuit is also protected by means of Industrial design registrations are granted in Brazil without sub- registration in Brazil. The protection granted by registration pro- stantial examination, which can be requested after the registration hibits unauthorised third parties from reproducing the topogra- is granted and at the owner’s own discretion. This fact does not phy by any means and to import, to sell and to distribute (for negatively affect the right, but courts tend to avoid granting ex parte commercial purposes) the reproduced topography, an integrated injunctions (to compel third parties to discontinue an alleged in- circuit with the reproduced topography or a product that con- fringement) based on industrial design registrations due to the lack tains an integrated circuit with the reproduced topography. The of this previous substantial examination (when there was none). law does not differentiate torts and crimes and the infringement acts may qualify as either one. Reproduction of the topography Notwithstanding that, the same rules that apply to patent infor study purposes only is not considered an infringement and fringement are also applicable to infringement of industrial de- this could be the only legal exception applicable to reproduction sign registrations and define which acts are considered torts and of integrated circuit topography through 3D printing. which are considered crimes. The acts are the same, but to the definition of crime the law added that in order to be considered Trade dress is not registrable in Brazil and protection is granted an infringement the copied product must either reproduce an at court level as part of the doctrine of repression of unfair com- object protected by industrial design registration or substantially petition. Rights over a trade dress accrue from continuous and

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pacific use of the trade dress in commerce. To reproduce and use in commerce an identical or confusingly similar trade dress which deviates clientele of the original product is an infringe- Maintaining the laws and adapting ment and qualifies as a crime. There is no exception for fair use their interpretation will prove to be in the law, but if use has no commercial intent, it will not be considered and infringement. However, it is worth asking: what if more efficient than simply changing reproduction of the trade dress by third parties through 3D printing does dilute its distinctiveness? This is still to be answered. the laws and starting from the scratch

Providing adequate protection

Brazil’s IP laws relating to patents, industrial design registrations, The above objectives will certainly be accomplished if the trade marks, integrated circuit topographies and trade dresses laws are not changed and real cases are brought to the courts. appear to be adequate to protect not only the rights of IP own- In the long run, maintaining the laws and adapting their in- ers, but also to protect the free dissemination of the 3D printing terpretation will prove to be more efficient than simply chang- technology and the home users of 3D printing. ing the laws and starting from the scratch. Technology will not await for the legal changes to be introduced and if the laws However, in order to guarantee this threefold protection – IP are unable to be efficiently applied and enforced, they will be rights, free dissemination of 3D printing and domestic users of simply ignored. 3D printing – interpretation of the existing legal provisions will have to determine the differentiation between to produce and to manufacture, will have to define objective parameters to establish © Ricardo Pinho, partner at Guerra IP the legal level for damages to the economic rights of the patent owner which will or will not qualify an unauthorised act of reproduction of a protected object as an infringement act, as well as to More on 3D printing establish the conditions for private use, for lack of commercial Read other articles about 3D printing published by intent and for the absence of damage to acquisition of trade Managing IP on the dedicated page on our website: mark or trade dress distinctiveness. managingip.com/3dprinting

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Navigating OEM-related IP challenges

Original equipment manufacturing in China provides many advantages for international companies, but IP-related pitfalls can be a challenge. Ted Chwu and Gordon Lee explain what rights holders have to look out for

hina’s rise in the last two decades to become one of the world’s pre-eminent low-cost manufactur- MINUTE ing powerhouse is well documented and pro- READ vides an overarching narrative to outsourced 1 manufacturing investment in the Asia Pacific region. The breathless sprint to achieve manufac- Original equipment manufacturing Cturing growth has come with its share of horror stories for in China is increasingly popular but foreign IP owners, and now with lower-cost neighbours in the rights holders must be aware of the region competing for the same investment, it is worthwhile to threats to their intellectual property. take stock of some of the lessons learnt the hard way. Because the manufacturing partner has easy access to a lot of your intel- China’s manufacturing might, and what some say is most attrib- lectual property, finding a partner utable for China’s poor reputation in IP protection, is its original you can trust is key. Rights holders equipment manufacturing (OEM) sector. A common misun- need to conduct thorough back- derstanding is that OEMs are “original” in the sense that they ground checks on their would-be are responsible for everything from manufacturing to branding partners and build in safeguards for of a product, as opposed to third party manufacturers of after- worst-case scenarios. Some of these market products and customisations. In reality, OEM produc- safeguards include liquidated dam- tion refers to an arrangement between an entrusting party and ages, granular and specific dispute an OEM, whereby the OEM is merely responsible for manu- resolution provisions and very de- facturing products pursuant to specifications of the entrusting tailed written record keeping, in party’s purchase order. In many cases, the entrusting party will case a dispute has to go to court. then apply its own branding, sell the product using its name, provide product support and licensing and other services.

To properly understand the IP pitfalls with OEM products one must first consider some basic truths. There are numerous advantages for a company to entrust a Chinese OEM with production, such as: a) Massively lowered production costs (up to 80% in some cases); b) Higher product volumes;

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c) Increased production efficiency leading to time savings; d) The flexibility to rapidly expand product lines; e) Access to the OEM’s personnel and production processes; and In many cases the only difference f) Access to the Chinese domestic market. between counterfeit and genuine However, every class of IP asset, be it copyright, trade secrets, goods is the time of day they were trade marks, patents, designs or utility models, may be shared in the course of outsourcing relationships and are vulnerable. produced within the same factory

The high-tech export leader in the region is Japan. Japanese companies have taken advantage of some spectacular OEM opportunities in China but also suffered at the hands of some high profile cases of IP and identity theft. Perhaps the most egregious understanding of the importance of IP rights, or the parties’ case involved NEC, which several years ago discovered entire position in respect of IP rights were not clearly set out at the unauthorised product lines being manufactured and sold under onset of the relationship. the NEC brand from fake NEC factories. Despite these issues and rising labour costs in China in recent years, Japanese high- end manufacturers continue to make plans to increase produc- Counterfeits are a widespread tion in China, contributing to the annual growth rate of 30 problem percent annually for the Chinese OEM sector. Counterfeiting is a major problem in China. In 2012, the Inter- national Chamber of Commerce estimated that the global value What are counterfeit goods? of counterfeit goods amounted to $1.7 trillion and China alone accounted for 70% of the seized counterfeits globally. A general definition of counterfeit goods is any goods which infringe upon the IP rights of another. A more subtle definition These goods also often make it back to their home country. In is one that has been adopted by the JPO, which refers to “free- a study conducted in 2014, the Japanese Ministry of Finance riding” goods that are produced with no investment and are in- found that 96.5% of counterfeit goods found in Japan were im- fringing on another party’s IP rights, including trade mark rights, ported from China. While it is true that a portion of these coun- design rights, patent rights and copyrights. terfeits are attributed to third party counterfeiters and not OEMs, it is probably a reasonable assumption that a good por- OEMs are in a unique position to produce counterfeit goods tion of counterfeit goods, particularly of the more sophisticated because: or even identical counterfeits, are produced by OEMs or based a) It may be necessary for an entrusting party to share propri- upon proprietary information provided by them. etary IP such as know-how, trade secrets, designs, trade marks and patents with the OEM, giving the OEM a head start in assimilating the technology. IP protection strategies and b) Equipped with the entrusting party’s IP, the OEM can man- practical tips ufacture unauthorised batches of counterfeit goods. In many cases the only difference between counterfeit and genuine It is worth stressing that there are really only two key strategies goods is the time of day they were produced within the same to dealing with OEMs, whether Chinese or not: factory. i) Know your counterparty and build a relationship; and c) The enticing financial incentive for OEMs to produce and ii) Assume at the outset that things will go wrong at some sell unauthorised batches of goods goes in hand with the point, and plan accordingly. sentiment that OEMs do not feel they owe any loyalty to entrusting parties, whom are often foreign companies. Below are some recommended best practices before engaging d) OEMs may use their entrusting parties’ designs, know-how with a Chinese OEM, and what to do when an entrusting party and technology as a base to develop more sophisticated finds that its IP has been infringed. counterfeit products of their own. e) OEMs may share their entrusting parties’ IP with other customers or potential customers to retain or earn their busi- Preventative measures ness, giving these third parties an unfair advantage or even an invitation to produce further counterfeit goods. a) IP due diligence – before engaging any OEM an entrusting f) Chinese OEMs have shown that they are often undeterred party should first conduct an IP due diligence exercise. This by the consequences. This is particularly so in smaller and will include: (i) identifying what IP assets there are, their more isolated locales where local protectionism may be a registration or application statuses in China and whether relevant factor. In some cases these OEMs are the largest there are any IP contracts or licenses attached to them; (ii) employer around and local officials may be under great pres- assigning classes for each asset based on their value and im- sure to protect local economic interests. portance; (iii) determining which classes of IP can and can- g) Lastly, in some cases OEMs may simply lack an not be shared; (iv) assessing the level of risk and ease by

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occur. Tactical use of utility models should be considered The OEM checklist where perhaps invention patent protection is either not available or unsuitable due to time and cost issues. These are some of the key issues to keep in mind when engaging an c) Keep all records of trade marks use – courts in China place OEM in China: great emphasis on documentary proof. Retention of all documents pertaining to use of a trade mark from the earliest 1) Know your OEM counterparty: to be forewarned is to be forearmed. date will pay dividends in the event that prior use of a mark Consider conducting litigation searching to see if the OEM or any has to be proved in court. of the senior management have been involved in IP infringement d) OEM due diligence – conduct due diligence to investigate cases previously. the OEM's legitimacy, track record, reputation for respecting IP, ownership structure, who their business partners are and 2) Know your own IP: ask yourself what IP can you live with being how it has dealt with the IP of its business partners in the leaked, and what IP you cannot. Consider on-shoring production of past. key critical components and processes. e) Contracts and agreements – entrusting parties should include well-drafted IP protection clauses in OEM and IP 3) Structure your agreements and contracts to a granularity that ac- contracts that adequately protect the IP to be shared. Con- knowledges different forms of IP-related disputes: consider arbitra- sideration should be given at the outset for “what if?” sce- tion clauses where appropriate, and litigation carve-outs for other narios. For example, disputes over quality and materials red-line situations. Consider what language to draft the agree- may be something that an entrusting party would want to ments in and what governing law. work with the OEM to resolve, in which case having an arbitration clause as a fall-back position in the contract 4) State specific amounts of compensation for certain eventualities. might be suitable. However, if unauthorised production Even if it is only a ballpark figure, that might be just enough of a runs are discovered by the entrusting party then arbitra- warning to dissuade counterfeiting. tion – with a potentially lengthy process and enforcement issues – would not be suitable and a carve out to preserve 5) File your IP in China and file often. Enforcement of unregistered the entrusting party’s right to litigation should be included. rights is extremely difficult by and large. Take advantage of differ- Similarly, providing in any agreement a liquidated damages ent forms of IP protection available in China, such as utility models amount – even if just a rough amount – for certain situa- which might be a more efficient and effective form of enforceable tions, for example the non-return of proprietary moulds right depending on circumstances. or tooling, might be enough to make a wayward OEM think twice. 6) Litigation may sometimes be your best – and only – recourse. Pre- f) When sharing prototypes, know-how or trade secrets that pare accordingly by quickly securing evidence of infringement may not be covered by prior contracts, entrusting parties when becoming aware of counterfeit behaviour. Know also that should always enter into non-disclosure agreements prior worthwhile damages are available in China: in a recent patent in- to disclosure. fringement case over RMB 150 million ($23.55 million) was g) Communicate with the OEM – even if IP protection have awarded to the patentee. been set out in a contract, it is important for the entrusting party to clearly communicate to the OEM what each party’s 7) But also be aware of quirks in Chinese IP law protection – in a rights and obligations are in respect of IP and that the en- Supreme People’s Court (SPC) decision in 2012, Ryohin Keikaku, trusting party takes its IP rights seriously. the holding company of the well-known Muji stores, opposed a registration for the Chinese version of “Muji”. Ryohin Keikaku based its opposition on its use of the mark on OEM goods that Enforcing IP in the event of infringement were manufactured in China but exported elsewhere and not sold in China, which it argued constituted “prior use”. The SPC rejected a) Investigations – an entrusting party should consider engag- Ryohin Keikaku’s argument and held that this alone was not suffi- ing a private investigator to collect as much evidence of in- cient to prove use of the mark. fringement as possible, as soon as possible. There is no evidence discovery litigation in China so oftentimes evidence of infringement can only be obtained through inves- tigators. Evidence preservation options are available through the court, but their effectiveness is questionable in practice which each IP asset may be copied if shared; and (v) in con- so acquiring evidence of infringement before the OEM sideration of the above, conducting a risk analysis to deter- party has had a chance to render the evidence out of reach mine whether the benefits of OEM production outweigh is important. the potential risks of infringement. b) Warning or cease and desist letters are not a pre-requisite b) Register your IP! This cannot be stressed highly enough. for commencing legal proceedings in China. Nonetheless, Trade marks, patents, designs, utility models and copyrights they are recommended in most cases not only because they are all registrable in China. An entrusting party should reg- are potentially a cost-effective method to stop infringement, ister at least its identified key IP before engaging an OEM. but because they also place infringers on notice such that In many cases it is significantly more difficult to defend IP they cannot raise an innocence defence in court. on the basis of unregistered rights should infringement c) Administrative raid actions are a cost-effective enforcement

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method and the response time from administrative authorities to seize goods is also relatively quick. Any evidence that is collected by the administrative authorities may also be admissible in court proceedings. As mentioned, this is espe- Ask yourself what IP can you live with cially useful in China where it may be difficult to collect being leaked, and what IP you cannot. evidence due to the lack of an evidence discovery step in the litigation process. Consider on-shoring production of key d) Criminal enforcement – the entrusting party may make a direct complaint of infringement to the Public Security Bu- critical components and processes reau. This is a cost-effective method of enforcement that may result in fines and a jail sentence for the infringer. This is a strong deterring factor to prevent repeated infringements. However, there are no damage awards available for losses to the entrusting party. in China. An entrusting party should not be fixated on the ben- e) Civil litigation – an aggrieved entrusting party may consider efits of OEM production and overlook the potentially signifi- initiating civil proceedings against an infringing OEM. While cant IP risks. Enforcing IP may be a costly and time-consuming this is often the most expensive and time consuming option, affair and some forms of IP, such as trade secrets, may be per- unlike in administrative raid actions the Chinese courts can manently lost once disclosed. Entrusting parties must therefore award damages to the IP owner, including the infringer’s prof- ensure that they have as many factors in their favour before they its. However, local protectionism and consistency of the qual- commit their key IP to the OEM. ity of the courts remains a problem in some areas in China.

© 2015 Ted Chwu and Gordon Lee. Chwu is a Seeing the risks and rewards partner at Bird & Bird in Hong Kong, while Lee is a Outsourcing production to OEMs in China can be highly lu- legal assistant, also in Hong crative. However, counterfeiting remains a widespread problem Ted Chwu Gordon Lee Kong

During October Managing IP will be attending the AIPPI Congress and AIPLA Annual Meeting and publishing the AIPPI Congress News and the AIPLA Daily Report.

If you are attending either event, pick up your free copies each day and also visit the Managing IP booth in the exhibition area for free copies of our publications and to find out more about our corporate subscription rates and other opportunities.

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Circuit overload

More than half of its judges have changed in the past five years, the Supreme Court keeps smacking it down, and a flood of new PTAB appeals is coming its way. Michael Loney assesses how today’s Federal Circuit is coping

n September, Kara Stoll heard her first arguments as a Federal Circuit judge. The former Finnegan partner is the seventh judge appointed to the appeals court since 2010, meaning more than half of its 12 sitting judges have changed in five short years. It also means Federal Circuit practitioners have less of an idea who they are Idealing with. “It is a dramatically different court from six or seven years ago,” says John O’Quinn, partner at Kirkland & Ellis in Washington DC. “You have seven new judges on the court since then and that’s going to reshape any institution.”

Court practitioners are trying to get to grips with the stance of the newcomers. Many of the judges have very short records on the bench from which to try and predict behaviour. Four of the judges have joined since the beginning of 2013. “It certainly makes it a little more difficult for people who are before the court on a regular basis to predict how these judges are going to react in various arguments,” says Dominick Conde, a partner in Fitzpatrick Cella Harper & Scinto’s New York office who focuses on pharmaceutical litigation.

A generation gap may be opening up on the court. Four members of the Court are in their forties, all of whom are at least 30 years younger than the three most senior active members of the court. “You get a fresh perspective being brought,” says O’Quinn at Kirkland & Ellis. “While all the judges are unquestionably being faithful to the case law, they are all going to have their own angles on it.”

The change in the composition of the Court has been even more jarring because three of the judges that have stood down since 2010 left the Court entirely rather than becoming senior

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The Federal Circuit 2015 – judging the judges

IP practitioners report that the seven new International Trade Commission practition- She served as director of the patent, trade Federal Circuit judges to have joined in the ers were pleased to see Jimmie Reyna’s mark and licensing department for FMC. past five years make it harder to discern trade background when he joined the court. where the individual judges stand. The Judge Alan Lourie judges themselves would claim they simply All of the four youngest judges on the Fed- APPOINTED 1990 take each case as it comes. However, it is pos- eral Circuit have government service expe- Lourie was previously vice-president of cor- sible to discern some leanings and trends rience. Chen and Stoll were at the USPTO, porate patents and trade marks and associ- from the composition of the court now. Moore, Chen and Stoll were at the Federal ate general counsel of SmithKline Beecham, Circuit as law clerk or technical assistant where he worked from 1964 to 1990. There is consensus about the judges at ei- and Hughes has Federal Circuit appellate ther end of the spectrum but it is less clear practice with the US department of Justice. Judge Timothy Dyk where all the judges in between stand. APPOINTED 2000 Chief Judge Sharon Prost Dyk was previously partner and chair of the The judge that patent owners would be APPOINTED 2001 issues and appeals practice area at Jones most pleased to see on a panel is Pauline Prost previously served as minority chief Day Reavis and Pogue from 1990 to 2000. Newman, who is the longest-serving sit- counsel, deputy chief counsel and chief Between 1983 and 1991 he was at various ting judge on the court. Newman has also counsel of the committee of the judiciary times adjunct professor at Yale Law School, expressed strident concerns about PTAB of the US Senate from 1993 to 2001, and the University of Virginia Law School, and proceedings. The one they would like to previously served in roles for the Senate the Georgetown University Law Centre. He avoid the most is Timothy Dyk, who joined Committee on Labor and Human Re- was associate and partner at Wilmer Cutler the court in 2000. All the other judges are sources, National Labor Relations Board, and Pickering from 1964 and 1990. less clear cut in their stances. Inland Revenue Service and Federal Labor Relations Authority. Judge Kimberly Moore Kathleen O’Malley is a former district court APPOINTED 2006 judge, so if you won in district court she Judge Pauline Newman Moore was a professor of law from 2004 to would be good to have on your panel. She APPOINTED 1984 2006 and associate professor of law from has also been at the front of the discussion Newman was special adviser to the US Del- 2000 to 2004 at the George Mason Univer- about whether the Federal Circuit should egation to the Diplomatic Conference on sity of Law. She served both as an assistant review matters de novo, calling for a revis- the Revision of the Paris Convention for the professor of law from 1997 to 1999 and the iting of how the Court ought to approach Protection of Industrial Property. She served associate director of the intellectual prop- this issue. In contrast, Judge Taranto back- on the advisory committee of the Domestic erty law programme from 1998 to 1999 at ground representing the United States at Policy Review of the Industrial Innovation the Chicago-Kent College of Law. Moore the Supreme Court means he can be more from 1978 to 1979 and the State Depart- clerked from 1995 to 1997 for Federal Cir- of an advocate of the high court than his ment Advisory Committee on International cuit Chief Judge Glenn Archer, and was an fellow judges. Intellectual Property from 1974 to 1984. associate at Kirkland & Ellis from 1994 to

judges – former Chief Judges Randall Rader and Paul Michel expertise to the court. As widely read Federal Circuit watcher and Judge Arthur Gajarsa. and patent consultant Hal Wegner noted recently, the four youngest members of the court all have government service ex- “The transition to new judges has been a little more abrupt than perience with either the USPTO (Judges Raymond Chen and in past years when you might have expected the retiring judges Stoll), the Federal Circuit as law clerk or technical assistant to continue to be a stabilising force in the court,” says Greg Cas- (Judges Moore, Chen and Stoll) or Federal Circuit appellant tanias, a partner at Jones Day in Washington DC who has ap- practice within the US Department of Justice (Judge Todd peared before the Federal Circuit more than 150 times. “With Hughes). Others note Judge Jimmie Reyna’s trade attorney those judges leaving the Court entirely it is a little bit less of the background, which has heartened International Trade Com- influence of the old guard remaining.” mission practitioners coming before the court.

This is not to say there is not considerable experience left, however. Three of the 12 active judges are eligible to take senior sta- Circuit breaker tus but have not done so – Judges Pauline Newman, Alan Lourie and Timothy Dyk. The remaining two judges are Chief In addition to change within, the Federal Circuit in the past five Judge Sharon Prost and Judge Kimberly Moore, who have been years has had to cope with big changes from above. The on the court since 2001 and 2006, respectively. Supreme Court has taken an increased interest in reviewing cases from the Federal Circuit – and reversing many of them. The younger judges are not novices either, and bring particular The Supreme Court has taken on 19 patent cases since Bilski v

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1995. From 1988 to 1992, Judge Moore Judge Evan Wallach was an associate with Knobbe Martens was employed in electrical engineering APPOINTED 2011 Olson & Bear from 1994 to 1996. with the Naval Surface Warfare Center. Wallach served as a judge of the United States Court of International Trade from Judge Todd Hughes Judge Kathleen O’Malley 1995 to 2011. He worked as a general liti- APPOINTED 2013 APPOINTED 2010 gation partner with an emphasis on media Hughes served as deputy director of the O’Malley was a district court judge for the representation at law firm Lionel Sawyer & commercial litigation branch of the Civil Northern District of Ohio from 1994 to 2010, Collins in Las Vegas from 1982 to 1995, Division of the United States Department presiding over more than 100 patent and and an associate at the same firm from of Justice from 2007 to 2013. He was the trade mark cases. O’Malley served as Ohio 1976 to 1982. Wallach took a leave of ab- assistant director in that office from 1999 Attorney General Fisher’s first assistant attor- sence to serve as general counsel and Pub- to 2007 and a trial attorney from 1994 to ney general and chief of staff from 1992 to lic Policy Advisor to Senator Harry Reid 1999. From 1992 to 1994, Judge Hughes 1994 and chief counsel from 1991 to 1992. from 1987 to 1988. served as a Law Clerk to Circuit Judge From 1985 to 1991, she worked for Porter Robert Krupansky of the Sixth Circuit. Wright Morris & Arthur, where she became a Judge Richard Taranto partner. From 1983 to 1984, she was an as- APPOINTED 2013 Judge Kara Stoll sociate at Jones Day Reavis and Pogue. Taranto specialised in appellate litigation APPOINTED 2015 at Farr & Taranto from 1989 to 2011. From Stoll was at Finnegan Henderson Farabow Judge Jimmie Reyna 1986 to 1989, he served as an assistant to Garrett and Dunner from 1998 to 2015, APPOINTED 2011 the solicitor general, representing the and became a partner at the firm in 2006, Reyna was an international trade attorney United States in the Supreme Court. He specialising in patent litigation with an and shareholder at Williams Mullen from was in private practice from 1984 to 1986 emphasis on appeals. Stoll was an adjunct 1998 to 2011, where he directed the firm’s with the law firm of Onek Klein & Farr. professor at George Mason University Law trade and customs practice group and its Taranto served as a law clerk at all three School from 2008 to 2015 and at the Latin America task force. He was an associ- levels of the federal court system. Howard University School of Law from ate and partner at law firm Stewart and 2004 to 2008. From 1997 to 1998, she Stewart from 1986 to 1998. Reyna served Judge Raymond Chen served as a law clerk to Federal Circuit on the US roster of dispute settlement pan- APPOINTED 2013 Judge Alvin Schall. She worked as a ellists for trade disputes under Chapter 19 Chen served as deputy general counsel for patent examiner at the USPTO from 1991 of the North American Free Trade intellectual property law and solicitor at to 1997. Agreement, and the US Indicative List of the USPTO from 2008 to 2013. He was an Non-Governmental Panellists for the World associate solicitor in the Office from 1998 Also on the Federal Circuit are senior Trade Organization, Dispute Settlement to 2008. From 1996 to 1998, Chen served judges Haldine Mayer, Jay Plager, Ray- Mechanism, for both trade in goods and as a technical assistant at the Federal Cir- mond Charles Clevenger, Alvin Schall, trade in services. cuit. Before joining the court staff, Chen William Bryson and Richard Linn.

Kappos in 2010, including Hatch-Waxman cases and cases in- not fully explored commodities in the judges of the court, we volving Federal Circuit jurisdiction. have some moving targets in terms of precedents, and we have to anticipate further changes that may be coming to the law.” The tension between the Supreme Court and Federal Circuit has increased with the number of cases the high court has taken The Supreme Court’s increased attention on patent cases has on. This was highlighted in the Limelight decision in 2014 in also fuelled calls for the Federal Circuit to be abolished. As it which the Supreme Court brazenly said the Federal Circuit’s approaches middle age, some believe it is too set in its ways. analysis “fundamentally misunderstands what it means to in- Since its establishment in 1982, its critics claim the Federal Cir- fringe a method patent”. cuit has becoming increasingly pro-patent. They point to the Supreme Court’s reversals as proof it is overstepping its bound- The changing composition of the Court and the rulings coming aries. In a white paper released earlier this year titled “Defend from the Supreme Court have consequences for those who ap- Innovation: How to Fix Our Broken Patent System” the Elec- pear before the court. “When we write our briefs we don’t know tronic Frontier Foundation (EFF) suggested ending the Federal which three judges will be hearing our appeal,” says Castanias at Circuit’s exclusive jurisdiction over patent cases so that other Jones Day. “So we have to anticipate as best we can arguments appellate courts have a chance to offer alternative approaches that will be both palatable to a wide range of judges as well as ar- and legal interpretations. guments that are both consistent with the relatively new precedents as well as anticipating future adjustments of the law. It is a “The pro-patent perception of the Federal Circuit has become bit of a game of 3D chess we are playing. We have a lot of as yet so widespread that the Federal Circuit has been cited as a reason

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ney Gene Quinn last year wrote a post on the widely read IP- Federal Circuit decisions on PTAB appeals, as of September 21 2015 Watchdog blog titled: “Is there an anti-patent bias at the Federal Circuit?” in response to a speech by Judge Chen in which the According to an analysis by Harness Dickey on its Harnessing Patent judge said he did not think it was particularly helpful for some Office Litigation blog, the Federal Circuit had issued 28 decisions on in the patent community to refer to judges on the court as being appeals on Patent Trial and Appeal Board cases as of September 21. In anti-patent. 24 of them – or 86% – the court simply issued a Rule 36 judgement, with no opinion. The change in composition of judges at the Federal Circuit and the increasing attention from the Supreme Court is also raising The four cases in which the Federal Circuit issued an opinion were: fears in patent owners that the court is shifting in a direction 1) In re Cuozzo Speed Technologies – Affirming the broadest reason- they don’t like. With Chief Judge Rader’s departure last year able interpretation claim construction standard; went the most vocal pro-patent voice on the court. 2) Belden v Berk-Tek – Non-precedential decision; 3) Microsoft Corp v Proxyconn – First reversal of a PTAB decision, gen- Some IP practitioners are concerned the Federal Circuit is be- erally because the Board’s claim construction rulings were not rea- coming less protective of patent rights as a result – not least for- sonable because they did not follow general claim construction mer Federal Circuit judges themselves. Former Chief Judge principles; Michel in March this year commented at an American Bar As- 4) Dynamic Drinkware v National Graphics – Decision affirming denial sociation conference: “It seems to me that the Federal Circuit of petition. is absolutely terrified [of the Supreme Court]... I think they’re going to bend over backwards to not look like they’re bucking Rule 36 affirmances were issued in: SoftView v Kyocera Corp; Clear- the Supreme Court.” lamp v LKQ Corp; Board of Trustees v Micron Technology; In re: Zillow; Helferich Patent Licensing v CBS Interactive; Luv N’Care v Munchkin; While the IP practitioners Managing IP spoke to for this piece Emcore Corp v Nichia Corp; Mobile Scanning Technologies v Motorola would not be drawn on whether the Court is becoming more Solutions; In re Continental Automotive Systems; Prolitec v Scentair anti-patent, they did detect it was less vigorous about defending Technologies; Neste Oil Oyj v Reg Synthetic Fuels; Bernina Int’l v patents, and was showing more deference to both the Supreme Handi Quilter; Personal Web Technologies v EMC Corporation; Avaya v Court and district courts. “It was previously rebellious of the Network-1 Technologies; Dell v Network-1 Security Solutions; Sony Supreme Court,” says Castanias at Jones Day. “There has been Corporation of America v Network-1 Security Solutions; Hewlett a bit of that recently, but by and large I see a court that is striving Packard Co v Network-1 Security Solutions; ConvaTec Technologies v to follow the Supreme Court in its guidance in the patent area.” Smith & Nephew; In re: Schott Gemtron Corporation; Prolitec v Scen- tAir Technologies; Schott Gemtron Corporation v SSW Holding Com- Not only that, a trend has emerged of the Federal Circuit trying pany; Neste Oil Oyj v REG Synthetic Fules; Corning Incorporated v to sort out problematic issues before they make it up to the DSM IP Assets; and In re: Rotatable Technologies. Supreme Court. “Since Judge Prost took over as the chief judge I think she has tried to be a little more proactive and protective of the Court’s reputation,” says Craig Countryman, a principal at Fish & Richardson who has led the briefing in more than 15 Federal Circuit and Supreme Court appeals. “They have really why Europe should not adopt a single unified patent court,” said tried to get out in front of some issues before something could the EFF white paper. “Confidence in the impartiality of the Fed- go up to the Supreme Court and get reversed. The Federal Cir- eral Circuit has been further undermined by revelations that its cuit is definitely more aware that the Supreme Court is watch- chief judge (who has since resigned) had improper communi- ing it closely. We are seeing it proactively taking steps to take cations with a patent lawyer that regularly appeared before the cases to try and fix things in situations where a few years ago court. The Federal Circuit was a good idea whose time has they might not.” passed. Its exclusive jurisdiction over patent cases should end.” One example came in the issue of laches. In order to evaluate Others have also expressed this view. In a 2013 speech the Ho- the impact of the Supreme Court’s decision on laches in the nourable Diane Wood, Chief Judge of the 7th Circuit, said it copyright case Petrella v Metro-Goldwyn-Mayer, the Federal Cir- was time to abolish the Federal Circuit’s exclusive jurisdiction cuit in December 2014 ordered an en banc review of SCA Hy- in patent cases. “[C]ircuit splits and disagreements with col- giene Products Aktiebolag v First Quality Baby Products to evaluate leagues force judges to sharpen their writing, push them to de- the defence of laches in patent cases. Another example came fend their positions, and from time to time persuade them that on the issue of international patent exhaustion. In April, the Fed- someone else’s perspective is preferable. This process of testing eral Circuit acting sua sponte ordered an en banc briefing in Lex- and experimentation is lost when uniformity is privileged above mark v Impression Products even before a panel decision had all other values.” come out in the case.

Michael Jakes, a partner at Finnegan in Washington who has Bending over backwards argued more than 30 appeals at the Federal Circuit, identifies fewer dissenting opinions at the Federal Circuit. “The Court In contrast to this, however, are fears that the Federal Circuit’s seems willing to resolve issues en banc rather than letting them stance is becoming less pro-patent in recent years. Patent attor- go on for a long time,” he says. “There were some fairly notice-

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able divisions in reviews in opinions in the past. I would say recently they seem to be working more in sync and seeking to re- “To say that a person of ordinary skill solve a lot of these issues. They certainly disagree all the time, but maybe not as strongly as in the past.” would understand the scope of the

Today’s Court is also showing more deference to lower courts. claim implies that the claim would In the October 2014 Teva v Sandoz decision, the Supreme Court held that the Federal Circuit must apply a “clear error”, inform such a person of the scope of not a de novo, standard of review when reviewing a district court’s resolution of subsidiary factual matter made in the con- the claim with reasonable certainty” struction of a patent claim. “One megatrend coming out of the Supreme Court is the message of deference,” says O’Quinn at Kirkland & Ellis. “The Federal Circuit, while it has a unique caseload, doesn’t have a unique appellate role. The message the about the high court’s new indefiniteness standard to boot. The Supreme Court has reiterated in a number of contexts, Teva v Supreme Court had overturned the Federal Circuit’s “insolubly Sandoz being the most visible one perhaps, is that deference is ambiguous” standard for proving a patent clam was invalid as in- the norm.” definite and said that patent claims are indefinite if they fail to inform “with reasonable certainty” those skilled in the art about the scope of invention. On remand, the Federal Circuit noted in an Overblown circuit impact opinion written by Judge Wallach in which he was joined by Newman and Schall that the Supreme Court “modified the stan- The perception of the Supreme Court repeatedly smacking dard by which lower courts examine allegedly ambiguous claims; down the Federal Circuit may be overstated, however. The Fed- we may now steer by the bright star of ‘reasonable certainty’, rather eral Circuit is not subject to circuit splits the way the regional than the unreliable compass of ‘insoluble ambiguity’.” courts are, so the high court normally only takes on cases that it expects to overturn. The Supreme Court denies a lot more To ram the point home soon after this, senior Federal Circuit of the patent case petitions it receives. Judge Bryson, sitting by designation as a district judge for a patent case in the Eastern District of Texas, noted he did “not In addition, O’Quinn says that the Supreme Court sometimes regard the difference between those two standards as being sig- takes a case with the idea of clarifying the law but doesn’t always nificant”. He added: “To say that a person of ordinary skill would succeed. “We have seen that in the 101 context, where the understand the scope of the claim implies that the claim would Supreme Court has had to repeatedly take that issue up,” he says. inform such a person of the scope of the claim with reasonable “I don’t think that’s a function of the Federal Circuit as much it certainty.” is of the Supreme Court answering part of the question but not answering the whole question and therefore finding itself hav- However, a very big exception to the idea of the Supreme Court ing to come back multiple times. Every time the Supreme Court not having a big an effect as people think is patent eligibility (see steps in and modifies patent law that’s really the beginning of “The 101 uncertainty”). Countryman says: “The Supreme the story, not the end. The question is: how are the lower courts Court has really had an impact there and the Federal Circuit going to interpret the modification?” frankly may be going a little overboard or being a little bit too overzealous in how exactly they are implementing that case law, This last point highlights an important issue. The practical im- particularly because the Supreme Court has written it so pact of many of the Supreme Court’s rulings may also be exag- broadly.” gerated. “For better or worse the Federal Circuit gets themselves into these situations where they take these kind of crazy posi- The most recent patent eligibility controversy came with the tions and then the Supreme Court smacks them down,” says Federal Circuit’s Ariosa v Sequenomdecision, which affirmed the Countryman at Fish. “But I would say a lot of the criticism is district court’s invalidation of Sequenom’s claims under Section overblown or there is a bit of an exaggeration about how much 101. Judge Linn issued a concurrence basically saying he dis- of an impact the Supreme Court is really going to have.” agreed with the Supreme Court guidance on 101 but that the court’s hands are tied. “But for the sweeping language in the Countryman points to the Supreme Court’s Teva decision on Supreme Court’s Mayo opinion, I see no reason, in policy or claim construction. On remand from the Supreme Court in statute, why this breakthrough invention should be deemed June this year the Federal Circuit held again that the district patent ineligible,” he wrote. court’s claim construction was wrong and that the asserted claims were invalid as indefinite. The majority of Judges Moore The patent eligibility issue is one of confusion and uncertainty and Wallach gave deference to the lower court’s fact finding but for Federal Circuit practitioners. found it had drawn incorrect conclusions of law from the factual bases. “If you are trying to advise a client on a 101 matter, the prece- dent is still sort of a mess,” says Castanias at Jones Day. “There Similarly, in April the Federal Circuit in the Nautilus case on re- is not a whole lot you can predictably tell a client, other than mand from the Supreme Court came to the same conclusion as claims that look like a business method have not been faring it had before, and even threw in a touch of dismissive sarcasm well. We still don’t quite know what an abstract idea is. I’m not

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swell of appeals”. He says two PTAB appeals he has worked on came back with Rule 36 affirmance within a week of the hear- “We’re concerned that the new Federal ing. “Usually when you are arguing an appeal you are waiting for two months for a judgment,” he says. “But with PTAB ap- Circuit practice is limiting the peals they are issuing these rulings quickly.”

availability of the public to understand Pond points out the burden will only increase because PTAB proceedings are more likely to be appealed than district court how our courts work” disputes because parties are less inclined to settle. PTAB verdicts are more likely to be appealed than district court ones, he says.

“My hunch for the reason for that is that most patentees started in district courts enforcing rights, were detoured and lost their sure you could put a dozen Federal Circuit practitioners in a patent rights and they still want their day in district court,” says room and we’d all agree in the first instance what an abstract Pond. “I also see those proceedings settling far less than in dis- idea is.” trict courts during litigation. That makes sense because there is a lot more middle ground between parties in district court litigation, whereas settling at the PTAB won’t get the patentees Short circuiting affirmances their patent rights back.”

The jurisdiction of the Federal Circuit is also evolving. While In addition to disquiet at the Federal Circuit increasingly affirm- often seen as a patent court, the Federal Circuit also hears ap- ing cases with no opinion, other concerns are being raised about peals from agencies including the Trademark Trial and Appeal the court’s practices recently. IP practitioners have been left Board, Boards of Contract Appeals, International Trade Com- unimpressed by the Federal Circuit pulling back the amount of mission, and United States Merit Systems Protection Board. information it posts on its website, for instance. At the end of But patent cases are accounting for a bigger share of its docket. 2014, the court announced a new policy: it would only publish This is being driven by appeals coming out of the Patent Trial “selected” orders instead of all orders, as it had previously. and Appeal Board (PTAB), particularly from inter partes review PACER is still available but is hard to navigate and costs to (IPR) proceedings. search and download.

Concerns are rising that the Federal Circuit will be over- The EFF in April said “selected” seemed to mean “few if any” whelmed. Some detect signs that the Court is looking for ways orders. Only six orders had been made freely available in the to ease its load. “The question that remains in my mind is first three months of the year, compared with 180 orders in the whether the IPR appeals are going to overwhelm the court and third quarter of 2014. overwhelm the court’s docket to the point where we are going to see fewer and fewer precedents to help guide the infringe- “We’re concerned that the new Federal Circuit practice is lim- ment trials,” says Castanias. “We are at the precipice of a brave iting the availability of the public to understand how our courts new world of patent litigation at the Federal Circuit.” work,” said the EFF. “The Federal Circuit hears all appeals in patent cases so its recent practice is especially disappointing There have been signs of the Federal Circuit being under strain. since it comes at a time when interest in patent law, and possible The court has made frequent use of its Rule 36 affirmance reform, is very high.” power, under which it can dispose of cases without issuing an opinion. “I don’t necessarily endorse this view across the board These may be symptoms of the Court’s unenviable workload. but I have heard some general complaints from other practi- However, some believe the changing jurisdiction of the Federal tioners who I have worked with that the Court has become too Circuit is also proof of its durability. Responding to the calls for willing to use the Rule 36 affirmance to dispose of cases where the Federal Circuit’s exclusive jurisdiction over patent cases to the lawyers thought at least a reasoned decision was merited to be abolished, Jakes at Finnegan counters that it may be even guide future cases,” says Castanias. “I think there is some con- more vital than in the past because of the increasing importance cern and some statistical basis to suggest that the Court uses its of the PTAB. While the Federal Circuit is affirming the vast ma- Rule 36 powers more now than it was five years ago.” jority of PTAB cases, it will have some important rulings to make on issues such as claim construction standards and In April, a Bloomberg article noted that the Federal Circuit was amending claims. affirming half of the appeals it had heard so far that month without opinion. It is likely the Court will continue to take advantage “The whole system is changing because of the inter partes re- of this power. “We may see a rise in Rule 36 affirmances, where view,” he says. “I think having the Federal Circuit deal with these the Federal Circuit affirms without opinion” says O’Quinn at cases is actually more important for consistency because so Kirkland & Ellis. “That may be one result from an increasing much of the development of the law on validity is going to be pressing work load.” coming from the Patent Office now. Splitting that up would get widely divergent results and would probably go back to where Joshua Pond, partner at Kilpatrick Townsend, says the Rule 36 things were in the 1960s and 1970s, so the Court may have a affirmances have been “a helpful tool” in “working through the more vital role now than before.”

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The Section 101 uncertainty

The Federal Circuit has only found patents valid in one Section 101 appeal since the Alice case. Frustrated IP practitioners are hoping the court will soon change from telling them what is not eligible to providing some guidance on what is. Peter Leung reports

he Federal Circuit’s approach to Section 101 post- Alice and Mayo has confused and disappointed many. The two-step test articulated by the Supreme Court in those cases is much criticised, especially the second prong requiring that an invention covering laws of nature, natural phenomena and abstract ideas have “somethingT more” in order to be patentable. Critics including former Federal Circuit Chief Judge Randall Rader have torn into last June’s Alice v CLS Bank decision, arguing that it is vague and unworkable and that it integrates concepts of novelty and non-obviousness (Rader also characterised the decision as the Supreme Court’s tendency to hand down vague balancing tests). The former chief judge and others also argue that the decision has hampered innovation in both software and life sciences.

Filing for business method patents has dropped more than 50% since Alice, though critics of such patents argue that is actually a positive development. The uncertainty is what is most frus- trating for practitioners and rights holders. “After Alice we know what the Supreme Court doesn’t like, where that one goal line is, but we don’t know where the other goal line is, what sort of patents they do like,” says Q Todd Dickinson of Novak Druce. “The tea leaves are hard to read.”

DDR – the outlier

One year since Alice, there is now a bit more guidance, though as Dickinson notes it pertains more to what is not patentable than what is. There have been 11 Federal Circuit cases (another case had a concurring opinion that discussed Alice but

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COVER STORY FEDERAL CIRCUIT

on an abstract idea, so we have to be careful about applying that standard too broadly,” explains David Wille, partner at Baker “The Supreme Court warned that Botts. “Both Bilski and Alice talked about fundamental eco- virtually every patent is based on an nomic practices and the building blocks of the modern economy, and the dangers of overly broad patents granting abstract idea, so we have to be careful monopolies on those. However, I think this language has been virtually ignored in the post-Alice decisions.” about applying that standard too This issue may already be receiving increasing attention. Fukuda broadly” says she is seeing this line of reasoning more and more from patent holders, arguing that their patent does not pre-empt other ways of practising a particular method, because the DDR opinion cites this as one reason that the invention there is the case was resolved on other grounds) that have applied patentable. Alice, and in only one case was the invention found to be patent eligible. “This analysis is related more to the second prong of the Alice test,” Fukuda explains. “In Mayo, the Court talks about the prob- That case is DDR Holdings v Hotels.com, which involved a patent lem of an invention foreclosing more future invention than the that covers systems and methods for combining content from underlying discovery can reasonably justify, and I’ve always read an external website with the style of the original page so that the that as the idea that if the invention contributed a lot of inventive user stays on the original page even though she has clicked on concept, you’re probably allowed to foreclose more of these fu- a link to another site. Judge Raymond Chen, writing the major- ture inventions, since patent rights naturally have a certain level ity and joined by Judge Evan Wallach, found that the invention of foreclosure.” passes the Alice two-step test.

First, Chen said that unlike other recent Section 101 cases What’s on first? where the inventions were found ineligible, the claims here “stand apart because they do not merely recite the performance The uncertainty about Section 101 has also led to debate as to of some business practice known from the pre-internet world when it should be applied. Judge Haldane Robert Mayer in along with the requirement to perform it on the Internet” but three separate concurrences has forcefully argued that 101 instead provide a computer specific solution to a problem spe- analysis should be the initial inquiry. As he argued in Ultramer- cific to computer networks. cial, Section 101 analysis “bears some of the hallmarks of a jurisdictional inquiry”. Furthermore, unlike the ineligible invention in Ultramercial, “the claims at issue here specify how interactions with the In- “Just as a court must assure itself of its own jurisdiction before ternet are manipulated to yield a desired result”. And, because resolving the merits of a dispute, it must likewise first assess of the specificity in the claims, the patent does not pre-empt whether claimed subject matter is even eligible for patent pro- every application of the idea. Thus, the patent contains the tection before addressing questions of invalidity or infringe- “additional features” needed to clear the patentability bar set ment,” he wrote. in Alice. Given the increasing popularity and high success rates in Alice Ching-Lee Fukuda, a partner at Ropes & Gray, says that plain- challenges, practitioners say there may be practical reasons for tiffs increasingly point to DDR to try to convince the Court of tackling 101 issues early on. a patent’s validity. That’s not surprising, given that it is the only case thus far applying Alice where the patent was not invali- “I have a couple of cases pending before the Eastern District of dated. However, she warns that not only does DDR not create Texas where we’ve filed Alice motions and are now trying to get a new “test” as some may seem to suggest, that holding also has a stay on the rest of the proceedings until the motion is decided,” several murky areas, such as what point is a problem specific to Wille explains. “The issue with not allowing a stay is that you computer networks. run into the problem where even if you have a meritorious Alice motion, you have to spend a lot of money to get to the point where it can be decided. This leads to defendants deciding to The building blocks settle non-meritorious cases against them simply because it is less expensive than filing the Alice motion.” After several years of being led by Judge Rader who held that an invention had to be “manifestly abstract” to fail Section 101, Louis Tompros, a partner at Wilmer Cutler Pickering Hale and the Federal Circuit seems to have swung in the other direction. Dorr in Boston, adds: “At the district court level, courts often Though some may say this is merely an application of the have a whole apparatus for claim construction and to analyse Supreme Court’s Alice decision, the Federal Circuit’s reading issues such as validity and invalidity, and then to hold may be broader than the decision requires. Marksman hearings, but this was really set up to drive analysis under 102 and 103. The question is, do you need to go through “The Supreme Court warned that virtually every patent is based this whole process to get to the 101 question?”

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Number of Section 101 decisions since Alice

5 Count of eligible Count of ineligible

0 Dyk Linn Prost Chen Reyna Lourie Mayer Plager Moore Bryson Taranto Hughes Wallach O’Malley Newman Clevenger

However, many also say that 101 should not be applied initially. Part of the uncertainty is that Section 101 challenges are rela- For example, David Kappos of Cravath Swaine & Moore has tively new. Tompros says that 10 or even five years ago, these argued that Section 101 should be a coarse filter applied at the challenges were relatively rare. But in the last few years, both the end of the analysis. The increasing focus on it has resulted in it courts and the USPTO have taken Section 101 much more se- being used too often to determine patentability questions, more riously. Because they are relatively rare to begin with, there is so than it was intended. Similarly, Robert Stoll of Drinker Biddle not much jurisprudence to draw on, and this uncertainty is & Reath tells Managing IP that rather than focus on Section compounded by the number of new judges on the Court. 101, more attention should be paid to 102 and 103.

There are also concerns that putting 101 first may be unfair to Still new ground patent holders in court. Forcing a plaintiff to respond to a 101 challenge at the outset, without the benefit of other procedures The newfound focus on Section 101, combined with the num- such as claim construction, can leave them unable to adequately ber of new judges, means that it is difficult to discern patterns respond. in how they are approaching these issues. Whereas the Court under Judge Rader appeared to have clearer patterns as to which One suggestion is for courts to use their discretion to decide judges sided with Rader’s “coarse filter” approach and which whether an Alice challenge is appropriate at the outset. Both didn’t (several lawyers pointed to the en banc Alice decision as Tompros and Wille point to Judge Rodney Gilstrap of the a decent road map as to where judges stood on this issue back Eastern District of Texas, who now requires defendants to then), the Court since the Supreme Court’s Alice decision ap- show good cause before bringing an Alice motion. A similar pears to be more unified in its approach. approach, they both suggest, may allow courts to take up early 101 challenges only when the plaintiff would not be put at a Every lawyer who spoke with Managing IP stresses that this ju- disadvantage. risprudence is still developing, and that the judges appear to be largely applying the Supreme Court’s guidance. “It’s still the ‘call- Such a mechanism may ensure that only clear-cut 101 motions it-like-I-see-it’ phase for the judges,” says Tompros. While it is would be decided early on, ones that would not turn on things premature to identify tendencies or trends among the judges, such as claim construction. some general stances can be gleaned. Both Judges Mayer and

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The Alice/Mayo scorecard Author of court’s opinion in bold

Case Published? Date Eligible/Ineligible Judges holding patent Judges holding patent eligible ineligible Versata v SAP Yes 9-Jul-15 Ineligible Plager, Newman and Hughes

Intellectual Ventures v Yes 6-Jul-15 Ineligible Dyk, Reyna and Chen Capital One

Internet Patents Yes 23-Jun-15 Ineligible Newman, Moore and Corporation v Active Reyna Network

Ariosa v Sequenom Yes 12-Jun-15 Ineligible Reyna, Linn (also a separate concurrence), Wallach

OIP Tech v Amazon Yes 11-Jun-15 Ineligible Taranto, Mayer (concurrence) and Hughes

Contract Extraction and Yes 23-Dec-14 Ineligible Dyk, Taranto and Chen Transmission v Wells Fargo

In re BRCA1- and BRCA2- Yes 17-Dec-14 Ineligible Prost, Clevenger and Dyk Based Hereditary Cancer Test Patent Litigation

DDR Holdings v Yes 5-Dec-14 Eligible Wallach and Chen Mayer Hotels.com

Ultramar v Hulu Yes 14-Nov-14 Ineligible Lourie, Mayer (concurring) and O’Malley

Buysafe v Google Yes 3-Sep-14 Ineligible Taranto and Hughes

Planet Bingo v VKGS No 26-Aug-14 Ineligible Taranto, Bryson and Hughes

Digitech Image Tech v Yes 11-Jul-14 Ineligible Moore, Reyna and Hughes Electronics for Imaging

IP Engine v AOL No 15-Aug-14 Ineligible - Not decided on Chen Wallach, Mayer 101 grounds (concurrence arguing Section 101 should have been applied first)

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Technology Lawyers for appellants Lawyers for appellees

US patent 6,553,350: “Method and apparatus for pricing products in multi-level product and MoloLamken; Figg, Ernst & Finnegan, Henderson, Farabow, organizational groups” Manbeck Garrett & Dunner; Weil, Gotshal & Manges

US patents 8,083,137, 7,603,382: “Administration of financial accounts” and “advanced internet Feinberg Day Alberti & Latham & Watkins; Troutman interface providing user display ccess of customized webpages” Thompson; Adduci, Mastriani & Sanders Schaumberg; Goldstein & Russell

US patent 7,707,505: Patent for dynamic tabs for graphical user interface for online, virtual application - Bismonte & Finley Troutman Sanders back and forward browser buttons without loss of data

US patent 6,258,540: A method for detecting a paternally inherited nucleic acid of fetal origin Irell & Manella; Russ August & Kaye Scholer; performed on a maternal serum or plasma sample from a pregnant female, which method comprises Kabat; Bartko, Zankel, Bunzel & amplifying a paternally inherited nucleic acid from the serum or plasma sample and detecting the Miller presence of a paternally inherited nucleic acid of fetal origin in the sample

US patent 7,970,713: “Computer-implemented methods for ‘pricing a product for sale’.” Tensegrity Law Group Latham & Watkins

US patents 5,258,855, 5,369,508, 5,625,465 and 5,768,416: “The claims generally recite a method of Zimmerman & Weiser Kilpatrick, Townsend & Stockton; 1) extracting data from hard copy documents using an automated digitizing unit such as a scanner, 2) Lerner, David, Littenberg, recognizing specific information from the extracted data, and 3) storing that information in a memory. Krumholz & Mentlik

US patents 5,753,441, 5,747,282 and 5,837,492: Method claims for comparing BRCA gene sequence Fish & Richardson; Parsons Behle McDermott Will & Emery with wild-type BRCA sequences and identifying differences & Latimer

US patent 7,818,399: “Systems and methods of generating a composite web page that combines Cooper & Dunham Hoffman Patent Firm; Susman certain visual elements of a “host” website with content of a third-party merchant.” Godfrey

US patent 7,346,545: “Method for distributing copyrighted media products over the Internet where the McKool Smith Hennigan Latham & Watkins consumer receives a copyrighted media product at no cost in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content.”

US patent 7,644,019: “Methods and machine-readable media encoded to perform steps for Schiff Hardin; Antonelli, Terry, Mayer Brown guaranteeing a party’s performance of its online transaction.” Stout & Kraus

US patents 6,398,646 and 6,656,045: “Computer-aided methods and systems for managing the game Weiss & Moy Price Heneveld of bingo. Generally, the claims recite storing a player’s preferred sets of bingo numbers; retrieving one such set upon demand, and playing that set; while simultaneously tracking the player’s sets, tracking player payments, and verifying winning numbers.”

US patent 6,128,415: “A device profile and a method for creating a device profile within a digital image Collins, Edmonds, Pogorzelski, Durie Tangri; Marshall, Gerstein & processing system.” Schlather & Tower Borun; Dorsey & Whitney; Jones Day; Ezra Sutton & Associates; Kaye Scholer; Crowell & Moring;

US patents 6,314,420 and 6,775,664: “A method for filtering Internet search results that utilizes both Quinn Emanuel Urquhart & Knobbe, Martens, Olson & Bear; content-based and collaborative filtering. “ Sullivan; King & Spalding Dickstein Shapiro

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Dyk appear to be sceptical of business method patents in gen- Swaine & Moore said a Supreme Court appeal would provide eral, and Judge Alan Lourie appears to have been taking an in- an opportunity for debate. “It is bad enough when bad patents creasingly forceful approach to Section 101. However, despite make bad law; it is terrible when good patents make bad law,” whatever tendencies the judges may have, they mostly appear he said. “If we now see a Supreme Court challenge, that gives to be adopting a similar reading of Alice and Mayo. in my view a wonderful opportunity for aggressive amicus activity because all is not lost yet and there is an opportunity on The biggest recent case was Ariosa Diagnostics v Sequenom. In the back of good facts to explain to the court that the law has a concurring opinion, Judge Linn lamented the broad lan- really gone into a major ditch here and that this case needs to guage of step two of the test as articulated in Mayo that dis- be the one to back it all up and reset.” missed all conventional steps taken without qualification, even where no one had previously had thought to take all And, much like the debate over patent reform, the reaction those conventional steps together to achieve the desired re- to this focus on 101 may turn in part on which industry sult. Because of this broadness, the Court held that the inven- you’re in. tion, which allowed doctors to test foetal DNA from what was previously considered medical waste, rather than more inva- “One thing that is emerging is how things seem to be a lot dif- sive techniques that took samples from the foetus or placenta, ferent on the life sciences side,” says Fakuda at Ropes & Gray. was not patent eligible. “Many of the developments like Alice, the PTAB and CBMs, have been helpful to the tech community where much of my Many observers, including Dickinson and Stoll, point to Ariosa practice is. On the other hand, there is a lot of concern about as an example of the problems caused by the broad language of how these developments are affecting the life sciences, and the Alice/Mayo two-step test. Speaking at the BIO Annual Con- there’s a bit of a cross-industry debate.” vention in Philadelphia in June, Robert Armitage, former general counsel at Eli Lilly, described Ariosa as “the most Similarly, despite the understandable frustrations with the broad disappointing decision I have ever read from the Federal Cir- standards drawn by Mayo and Alice, it may simply be part of the cuit”. Sequenom has filed a petition for an en banc rehearing. process of developing jurisprudence in an area where the Supreme Court has apparently decided a bright line rule is not At the BIO International Convention, Kappos of Cravath suitable.

IPSTARS.COM The research for the 2016 IP Stars has begun!

Our researchers have started working on next year’s IP Stars this month. The rankings of firms and individuals will be published next year.

For more information about IP Stars, including details about the questionnaires, the research timetable and to read our FAQ visit ipstars.com, where you can also see last year’s rankings and analysis.

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Demanding security from your supply chain

As your goods move from factory to retail, they can be tampered with, stolen, or replaced by counterfeits. Lee Macfarland provides guidance on risks and best practices through the supply chain

roducing and transporting goods across international borders will inevitably result in a complex supply chain. For multinationals, these can involve MINUTE hundreds, if not thousands, of direct and indirect READ employees in several countries around the globe. 1 At every stage of the supply chain there are risks of Pinterference which can harm your business. Understanding With supply chains spanning the how this interference occurs and how to prevent it is crucial to globe, there are more and more op- successfully managing a supply chain. As China and other portunities for counterfeiters to countries in Asia continue to be key manufacturing locations, tamper, steal or replace your goods in-depth knowledge of regional and country-specific supply with fakes. Companies need to have chain issues is undeniably important. procedures to monitor and protect their product every step of the way. Long term relationships with busi- Secure links in your supply chain ness partners should be nurtured and valued, as constantly switching Businesses rarely fail to emphasise quality as the priority in their manufacturers increases the risks of supply chain, but security often goes undervalued. Low-paid IP theft. Similarly, subcontractors factory workers may want to steal high value products; environ- who think long term and have mental pollution and corruption can cause public outcry; and happy employees can help reduce health and safety of worker or lack thereof can have devastating risks. Once the goods leave the fac- consequences. These problems can be exacerbated given that tory, both obvious and discreet secu- many supply chains start in developing countries, where local rity measures are needed to monitor standards are not as high as in the West and rigorous training and track your goods as they move must be employed to achieve acceptable levels. toward their final destination.

As such, proper supply chain management and security is a growing concern for international companies, and rightly so with the US Securities Exchange Commission conducting increasingly far-reaching investigations for FCPA violations. Also, the risk of public relations nightmares grow with the rapid communications of the digital age.

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good business incentives in order to create more jobs and boost Maintaining control the economy in return for a company’s long-term foreign direct investment. However, developing countries necessarily entail a When establishing or expanding production to a new territory, higher degree of risk. Essentially you are manufacturing a high- companies have different business models, whether they own value product in a country where the wages of the workers are their own factories, have a joint venture with local companies very low; the retail price of one handbag or a few pairs of shoes or work closely with third-party suppliers. can be the equivalent of a month’s salary.

Of course, the more control a company has over its supply chain Whether in-house or via a supplier, a large risk in the manufac- the better, so owning a factory outright allows for the most man- turing stage is theft by workers of finished goods, semi-finished ageable model. However, this can result in much higher costs, and goods, new designs or other industrial knowledge. The manu- in developing Asian countries in particular, foreign companies facturing process itself is, by definition, processing low-value operating their own factories are held to much higher standards raw materials into high-value finished goods through machin- than local companies. Especially for newly established companies, ery and labour. The level of security and procedural require- it is not an option to immediately invest in their own factory, but ments should reflect this. Where the level of problems is more there is also the risk that by the time a company has grown to in- systemic, overproduction can be a high risk, with management ternational renown, starting a new factory from scratch could be asking workers to do extra shifts and collecting and profiting too large a disruption to an existing supply chain. from the extra goods produced.

As such, working with local companies is a much more com- Physical security measures should be both obviously and dis- mon option. In China, foreign companies can form a joint ven- creetly employed, to provide discouragement from and detec- ture with local business entities. However, this is becoming less tion of many types of misconduct. Regular trainings should be and less popular due to the large amount of horror stories from provided to workers, which emphasise that security is every- companies who encountered problems with their JV partners. one’s responsibility and that protecting the company’s bottom line is essential. In manufacturing facilities where there are large With JVs, a substantial risk is that one’s partner will decide that numbers of workers, it is especially important to establish clear they would be better off starting a new independent business, incident reporting systems, and make employees aware what once the knowledge transfer, industry expertise, and investment should be done if they discover any suspicious activity. Frequent in training has been completed, instead of sharing profits. What security assessments and testing should be conducted to ensure may seem like overly cautious measures at the beginning of a that security equipment and procedures are fully functional and business relationship, such as lengthy non-compete agreements being used effectively. and retaining registration of local trade marks, are essential to avoid risks that may arise years down the line. It is also not un- To limit potential supply chain and security risks, it is prudent heard of for local partners to overproduce with extra, late-night to keep employees that are directly hired and reporting to global shifts for production workers, and competing with your autho- or regional headquarters in the factories to supervise and report rised products in the marketplace. After all, you have handed on suspicious activities. Companies should also limit their sup- them all the industrial knowledge to make your product. plier’s access to key raw materials, such as security labels and pre-made components, to be able to quickly and accurately Working with third-party suppliers can be a large risk as it is difficult identify unauthorised productions. to be sure if they are fulfilling the terms of the contract in the way agreed upon. In certain production cities in Asia, some manufac- When working in lower-tier industrial cities in Asia, one of the turers have “show” factories to present to clients but are producing best assets a large international company should have or require elsewhere. The actual factories may be much worse, as we have from subcontractors is providing a stable work environment seen in high profile cases. They may be much dirtier, have lower where employees have opportunities to advance and grow within safety standards and even employ child labour; a public relations the company. This ensures that employees will want to retain their nightmare waiting to happen. In one well-known case, a supplier jobs and will not risk being terminated by engaging in miscon- was subcontracting their manufacturing work to a prison. duct. Monitoring employee satisfaction levels and asking for regular feedback on how to improve can reduce risks dramatically. In order to retain more oversight, a business should establish itself as a large, repeat customer and put its own directly-employed staff In one case, a major electronics company found that waste at within the manufacturing facility. Changing from supplier to sup- their supplier’s factory increased from 4% to about 10% in the plier, year on year chasing the cheapest deals and moving on each span of a few months. My company CBI was asked to conduct time a supplier makes a mistake is the best way to end up with a several weeks of surveillance on the target to determine the number of counterfeiters and competitors in the market. source of the problem. In this case, we checked the factory’s waste disposal process to ensure that products were being properly recycled. We monitored for backdoor sales, unauthorised Producing solutions, not problems production and even sabotage. Ultimately, none of these issues proved to be a problem. We placed an informant in the factory The manufacturing process is based in developing countries as a worker and deployed extensive surveillance. We soon for the majority of large goods producers. Of course this is nec- learned that the workers – who were primarily immigrant essary to keep costs down and often governments will give labourers from Southeast Asia – were asking to work double

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shifts in order to be able to send extra remittances home. In addition, what little sleep the workers were getting was inside Key themes for security best practices crowded, non-air-conditioned dorms. Wastage was rising because the factory workers were simply too tired to perform their • People can be a company’s best asset, but dissatisfied employees best. Our client re-evaluated their vendor policy and potentially are the greatest threat to a company. avoided a large corporate social responsibility scandal. • Proper reporting systems, incident logbooks, and procedural measures need to be employed at all levels of the supply chain. Keeping shipping above board • Regular training should be conducted with employees, so that they Use of third-party logistics suppliers is inevitable within a large are aware of security measures and know how to recognise and re- supply chain; most companies cannot afford to operate a fleet of port suspicious activity. ships, trucks and aeroplanes.However, by nature, shipping goods often involves entrusting a large consignment of valuable product • Security features should be used both overtly as a deterrent, and to only one or two individuals in charge of the vehicle and for a more subtly, to detect evidence of misconduct. lengthy amount of time, with little supervision. There is a large risk of direct theft of products, or for diversion of genuine goods • Frequent security assessments and vulnerability testings should be and introduction of counterfeits into the supply chain. conducted, especially in high-risk areas within the supply chain.

Companies need to use strict controls to prevent drivers and others from accessing or tampering with the product. After all, especially when moving goods within one country, there are extremely limited circumstances where drivers will need to access the product. When transporting goods internationally and high imitation counterfeits by employees, or even employees detailed inspections may be conducted by Customs or other abusing their staff discounts and access to frequent sales. government bodies, an official report should be issued, or at least can be requested. Tamper seals and modern technologies Frequent inventory checks should be conducted with respect to such as RFID can very quickly improve inventory tracking dur- both goods in warehousing and in storefronts, to ensure that ing this part of the supply chain and ensure that all the product nothing has gone missing. With the increase in CCTV usage, that departs from your manufacturing facility arrives as and companies should use independent security contractors to both when it should. Some of these tracking technologies should not monitor live feeds and frequently review footage during high-risk be made explicit to the shipper, such as simple electronic means periods, with detailed logbooks of suspicious activity. Security to record opening and closing of shipping containers, which tests can be conducted by third-parties to ensure that shoplifters can then be compared to incident logs. are caught in storefronts, and that security responds quickly to in- truders outside of hours, though of course this necessitates that A global fast-moving consumer goods company received qual- in-house security managers are onsite to deal with incidents. ity complaints from a number of customers buying from a specific distributor. After making some purchases through mystery In one case, CBI discovered an online store selling what was ini- shoppers, it appeared that the product in the distributor’s stores tially suspected to be diverted goods, as the price was lower than were nevertheless genuine. CBI then conducted surveillance retail price, though the security devices were consistent with gen- on the goods leaving the authorised manufacturer through the uine goods. CBI made further contact with the seller, who claimed shipping process to the distributor, in order to find any evidence to be an employee and thus able to access goods at employee dis- that product was being tampered with. For initial shipments, count rates. Through coordinated action with the brand’s security surveillance produced no evidence of tampering with the department, samples were bought and sales records noted inter- goods, though there were some minor irregularities. After vary- nally, which led to the dismissal of the employee concerned. ing the approach slightly, we found that one of the night drivers was stopping during his route at a service station and offloading some genuine goods to be replaced with counterfeit goods, re- A comprehensive plan sulting in a mix of genuine goods and counterfeits going to the distributor. Supply chains are increasingly complex and wide-ranging, and ensuring security may appear to be a daunting challenge. How- ever, a well thought out and comprehensive plan covering each Eye for detail during retail step of the supply chain can go a long way in minimising risks and headaches. The sales stage generally poses a lower risk of simple misconduct such as theft. Retail workers are generally paid better than factory workers so as a result have a lower financial incentive to © 2015 Lee Macfarland. Macfarland holds the steal from your business. Moreover, increased physical security position of IP and security director at CBI measures are necessarily employed and utilised by storefronts Consulting and is based in CBI’s Hong Kong office to combat the risk of shoplifters. However, there is still risk of Lee Macfarland more complex frauds with genuine goods being replaced by

MANAGINGIP.COM OCTOBER 2015 39 40-40 NEW Feature CBM.qxp_Layout 1 24/09/2015 15:28 Page 40 ||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||| US CBM PATENTS |||||||||||||||||||||||||||||||||||||||||||||||

What constitutes a covered business method under the AIA?

There is a split in authority at the Patent Trial and Appeal Board over what patent claims are covered business methods. James M Heintz and Jeffrey L Johnson analyse recent developments

wo recent developments have caught the attention of those wishing to contest the validity of US patents MINUTE outside of district court litigation. First, the America READ Invents Act (AIA) created a new forum for contesting 1 the validity of an issued patent: the Patent Trials and Appeals Board (PTAB) of the USPTO. The PTAB is Since AIA trials began in September, oftenT considered to be a more favourable forum than district 2012, the PTAB has become a courts for establishing invalidity. Second, the Supreme Court’s favoured forum for asserting an in- decision in Alice v CLS Bank in 2014 has paved the way for many validity defence. And since the patents, particularly those directed toward what are commonly Supreme Court’s Alice decision, one referred to as business methods, to be found invalid as claiming of the defence bar’s favourite de- ineligible subject matter. fences to a patent infringement suit has been to challenge the patent as The PTAB conducts three different types of proceedings for being invalid under 35 USC §101 contesting the validity of an issued patent. However, for any because it claims an abstract idea. patent issuing from an application filed prior to March 16 2013, For patents issued prior to 2012, the a defence under 35 USC §101 can only be raised in a covered only way to raise a §101 defence at business method (CBM) review proceeding. Thus, a threshold the PTAB is by showing that the question is whether the patent qualifies for CBM review (the patent is eligible for a covered busi- existence of a single claim drawn to a CBM is sufficient to qual- ness method (CBM) review. But ify every claim of the patent for CBM review, even if the petition there is a split in authority at the does not request review of that single claim). PTAB over whether certain types of claims are covered business The AIA stipulates that CBM review is “for review of the validity methods. of covered business method patents.” A “covered business method patent” is defined as:

a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.

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US CBM PATENTS

The statute does not define “financial product or service,” which raises a number questions concerning the scope of this term as discussed below. The statute does not define “financial product or service,” which raises a 1. What is a financial product or service? number questions concerning the

In the Federal Circuit’s recent first opinion in an appeal of a scope of this term PTAB final written decision in a CBM proceeding (Versata Development Group v SAP America (Fed. Cir. 2015)), one of the issues on appeal was whether the patent qualified as a CBM patent. Versata argued that a “financial product or service” in the definition of a CBM was limited to “products or 1. A method comprising: services from the financial sector – i.e., banks, brokerages, transforming, at an authentication host computer, received holding companies, insurance, and similar institutions with a data by inserting an authenticity key to create formatted finance focus.” The Federal Circuit rejected this argument. In data; and so doing, the Federal Circuit noted that, during the USPTO’s returning, from the authentication host computer, the for- rulemaking process for implementing CBM review, the matted data to enable the authenticity key to be retrieved USPTO had explained that the legislative history supported from the formatted data and to locate a preferences file, the proposition that the definition of CBM patents be broadly wherein an authenticity stamp is retrieved from the prefer- interpreted to “encompass patents claiming activities that are ences file. financial in nature, incidental to a financial activity or complementary to a financial activity” and had rejected a sugges- 17. An authentication system comprising: tion to limit the definition to products or services of the an authentication processor configured to insert an authen- financial industry. Thus, the Federal Circuit agreed with Board ticity key into formatted data to enable authentication of the that the claims in that case, which were directed to “a method authenticity key to verify a source of the formatted data and for determining a price of a product” were within the statutory to retrieve an authenticity stamp from a preferences file. definition of a CBM patent. These claims do not contain any express limitation on the type While the Versata decision establishes that the definition of a of web page being authenticated, and thus can read on “format- CBM patent is to be construed broadly and is not limited to ted data” such as web pages that are purely informational, as well products or services from the financial sector, another impor- as webpages that are used to conduct financial transactions or tant question was not addressed in that decision: e-commerce. However, the PTAB noted that the “written description of the ’191 patent discloses a need by financial institutions to ensure customers are confident that the financial 2. Must the claim be expressly tied institution’s web page is authentic” and that “the ’191 patent dis- to a financial product or service? closes alternative embodiments of the invention as being used by financial institutions”. Thus, the PTAB held in PNC Bank In Versata, the claim language “a method for determining a price that claims 1 and 17 were CBMs on the basis of statements in of a product” explicitly tied the claimed method to a financial the specification indicating that the claimed method could be product or service, at least in the sense that determining a price used in connection with a financial product or service even is “incidental to a financial activity or complementary to a fi- though the claim did not expressly implicate a financial product nancial activity.” Whether claim language that recites a method or service. that could be used in financial product or service but does not explicitly implicate a financial product or service is the subject A similar conclusion was reached in the recent institution de- of an apparent split in authority at the PTAB. In some cases, a cision in Square v Protegrity (CBM2015-00014, Paper No. 17). statement in the specification of a patent to the effect that a In that decision, the following claim of US Patent No. 6,321,201 claimed method or apparatus could be used in connection with was found to be directed toward a covered business method: a financial product or service has been held to be sufficient, while in other cases it has not. 1. A method for processing of data that is to be protected, comprising: A recent PTAB final decision in which a specification state- storing the data as encrypted data element values (DV) in ment tying a claimed method or apparatus to a financial prod- records (P) in a first database (O-DB), the first database (O- uct or service was found to be sufficient to confer covered DB) having a table structure with rows and columns, each business method status on a patent is PNC Bank, NA v Secure row representing a record (P) and each combination of a Axcess (CBM2014-00100, Paper No. 43). At issue in that case row and a column representing a data element value (DV), was US Patent No. 7,631,191, which is directed toward the in the first database (O-DB) each data element value (DV) concept of authenticating formatted data such as a web page is linked to a corresponding data element type (DT); with an “authenticity stamp.” Claims 1 and 17 were found to storing in a second database (IAM-DB) a data element pro- be representative: tection catalogue (DPC), which contains each individual

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US CBM PATENTS

data element type (DT) and one or more protection attrib- (emphasis added). Claim 11 of the ’547 patent was found to be utes stating processing rules for data element values (DV), illustrative: which in the first database (O-DB) are linked to the individual data element type (DT); 11. An analysis control system for use with a communica- for each user-initiated measure aiming at processing of a tion facility including remote terminals for individual given data element value (DV) in the first database (O-DB), callers, wherein each of said remote terminals comprises initially producing a calling to the data element protection a telephonic instrument including a voice communication catalogue for collecting the protection attribute/attributes device and digital input device in the form of an array of associated with the corresponding data element type, and alphabetic numeric buttons for providing data and controlling the user’s processing of the given data element wherein said communication facility has a capability to au- value in conformity with the collected protection attrib- tomatically provide terminal digital data, indicating a call- ute/attributes. ing telephone number, said analysis control system comprising: In finding that claim 1 was directed toward a CBM, the PTAB interface structure coupled to said communication facility focused on the last step in the claim of “controlling the user’s to interface said remote terminals for voice and digital processing of the given data element value in conformity with communication and including means to provide caller the collected protection attribute/attributes.” The PTAB then data signals representative of data relating to said individ- noted that the specification discloses that protection attributes ual callers provided from said remote terminals or auto- are used to protect against unauthorized access of a data portion matically provided by the communication facility with in a database and that “in other fields, such as industry, banking, respect to the remote terminals prior to the close of com- insurance etc, improved protection is desired against unautho- munication with the callers including caller personal iden- rized access to the tools, databases, applications, etc. that are tification data entered by the caller via the digital input used for administration and storing of sensitive information.” device and said terminal digital data indicative of a calling (emphasis added). telephone number; record testing structure connected to receive and test said The PTAB also relied on Fig. 5, in which “Social Allowance” caller data signals indicative of said terminal digital data and “Housing Allowance” are the protected data and a “Finan- representative of said calling telephone number and said cial manager” is an authorised user. Thus, as in PNC Bank, a caller personal identification data against previously claim not expressly implicating a financial product or service stored terminal digital data and caller personal was found to be a CBM on the basis of statements in the spec- identification data; ification that the claimed invention could be used in connection storage structure for storing certain of said data provided by with a financial product or service. said individual callers including item data for ordering particular items; and The PTAB’s institution decision in FedEx Corp v Ronald A Katz analysis structure for receiving and processing said caller Tech Licensing Corp (CBM 2015-00053, Paper No. 9), however, data signals under control of said record testing structure. reached a different result. The patent at issue in FedEx is entitled “Telephonic-Interface Statistical Analysis System,” which is de- (emphasis added). scribed in the specification as follows: In determining whether claim 11 constituted a CBM, the Generally in accordance with the present development, indi- PTAB held that the recitation of “ordering data for ordering vidual callers . . . may be screened or qualified. Also in accor- particular items” was not sufficient to qualify the claim as a dance herewith, the data of individual callers may be collected, CBM because the claim did not recite ordering, but rather correlated and tested . . . for processing in accordance with var- “storing … item data for ordering particular items.” The ious programs and external data. As a consequence, various PTAB was also not persuaded that the disclosure in the spec- objectives are accomplished. For example, a select subset of ification that the disclosed system could be used to “automate the callers may be isolated and specifically identified, or related a promotion or mail-order operation, even to the extent of data may be processed, or transactions may be actuated. The including inventory control” was sufficient to qualify the possibilities for application of the system are substantial and claim as a CBM because “a mail-order operations is not nec- varied as will be apparent from the exemplary structure and essarily financial in nature or incidental or complimentary to functions as described in detail below. a financial activity.” In a request for rehearing on this point, In one operating process format, the public might be polled FedEx argued that “[o]rdering items involves the practice, ad- with regard to locating the specific purchasers of a defective ministration, or management of a financial product or serv- or dangerous product. Alternatively, the public might be ice. Indeed, the vast majority of businesses only accept orders polled with the objective of locating persons susceptible to for items (by phone or otherwise) and deliver the items in a specific ailment or disease. Public auctions of unprece- return for some payment.” In denying the request for rehear- dented participation are possible. Legal lotteries are enabled ing, the PTAB rejected this argument, holding that “the fact that are interesting, effective and very economical on an in- that a majority of businesses – as opposed to all businesses dividual participant basis. The system also might be em- – only accepts orders for items in return for payment would ployed in various game formats or to automate a promotion not show that the claims necessarily involve movements of or mail-order operation, even to the extent of including inventory money, or, more generally, are complementary to a financial control as detailed below. activity.” (emphasis added).

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US CBM PATENTS

Number of CBM petitions filed by month

0 2013 2014 2015 July July July May May May April April April June June June March March March August August August January January January October October February February February December December November November September September

Thus, FedEx can be read as establishing a requirement that the unauthorized access to data in the banking field does not nec- language that ties the claim to a financial product or service essarily tie the claims to the movement of money. On the other must necessarily involve the movement of money. hand, it may be possible to distinguish these cases on the difference between the specific disclosure of the word “bank” in A similar, although unstated, requirement appears to have been PNC Bank and Square on the one hand and the absence of this relied on in the PTAB’s decision in Salesforce.com v Applications word in the disclosure in FedExand Salesforceon the other hand. in Internet Time (CBM2014-00162, Paper No. 11). In that decision, the disclosure in the specification of a “business content layer” as including “business knowledge, logical designs, phys- Three certainties ical designs, physical structures, relationships, and data associated with a selected area of business activity,” which may be “a Several issues concerning eligibility for CBM review appear functional field within an organization, such as finance or reasonably certain. First, CBMs are not limited to the finance human resources” was held to be insufficient to qualify a claim industry. Second, a claim that expressly recites a limitation that as a CBM. ties the claim to a financial product or service will qualify as a CBM. Third, for a claim that is not expressly tied to a financial The requirement in these cases that the language tying the product or service but that is accompanied by a specification claim to a financial product or service must necessarily tie the that discloses some connection to a financial product or serv- claims to the movement of money may be seen as contrary to ice, the CBM determination may depend on the composition the holdings in PNC Bank and Square. For example, in PNC of the panel deciding the question and the specific nature of Bank, one of the passages of the ’191 patent specification relied the disclosure. on was a discussion of the need to ensure that a web page at “www.bigbank.com” was authentic. The use of a bank’s webpage © James M Heintz and Jeffrey does not necessarily involve the movement of money. For ex- L Johnson. Heintz is a partner ample, a user may simply wish to verify the authenticity of the in the Northern Virginia office web page before performing an administrative task such as and Johnson is partner in the James M Jeffrey L Houston office of DLA Piper changing the user’s password. Similarly, in Square, the disclosure LLP (US) in the specification that the invention could be used to prevent Heintz Johnson

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EPO oppositions are affordable, powerful and increasingly important

the proposed unified Patent Court fee for revocation proceedings is €20,000. the ePO fee for opposition proceedings is €775. David Lewin expands on how and why you should be taking full strategic advantage of the ePO’s opposition procedure

he long-awaited European patent with unitary effect (Unitary Patent) will serve as a welcome new option minute for users of the patent system in Europe, in addition read to national patents and classical (non-unitary) Euro- 1 pean patents. And with it – completing the enhanced European patent system – will come the Unified Heads continue to turn towards Patentt Court (UPC). Europe in the patent world, awaiting the Unified Patent Court The territorial scope of a Unitary Patent will extend to multiple and its promise of single rulings EU member states. The rulings of the UPC will also potentially covering many EU states. If Europe have effect in many EU states. The possibility of single infringe- sits somewhere in your IP risk ment rulings or injunctions covering such a wide geographical strategy, the opposition procedure area in Europe – with a market size potentially exceeding for at the EPO should routinely be example that of the United States – cannot be ignored. considered. The procedure is simple and cheap, and is (and will remain) Those handling worldwide patent strategy and risk will no the only way of taking out any doubt be keeping a watchful eye on the changes in Europe as European patent across its full they unfold. They should not allow the fanfare surrounding the geographical scope in a single step. UPC to allow them to lose sight of the opposition procedure It is well-established and tried and at the EPO. tested, and backed up by a respected body of largely-settled For IP practitioners unfamiliar with the system in Europe, the case law. The users of the system are EPO opposition procedure is a post-grant procedure directed from all corners of the world, and at bringing about revocation of a European patent, whether they are putting the procedure to or not unitary effect has been requested. An EPO opposition good strategic use. Whether you is akin to a revocation action in a national court or as pro- face licensing negotiations or a real posed at the UPC, and the procedure is here to stay. It will re- prospect of litigation with a main the only way for a third party to seek full revocation of European element, the EPO a European patent – across its territorial scope – in a single opposition procedure can help you. procedure (see opposite diagram). There are today 38 EPC contracting states (see map) in respect of which a European patent could be granted and take effect, including all of the 28

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EPO OPPOSITION STRATEGY

Revocation by EPO opposition and UPC

EPO opposition UPC applicable? applicable? Unitary patent if requested Yes Yes (most EU states)

Separate Single EPO patents Yes Maybe application (EU states)

Separate patents Yes No (non-EU states)

PROSECUTION GRANT REVOCATION

EU states as well as notable non-EU states such as Around 1,500 different opponents filed just short of 4,000 op- Switzerland, Turkey and Norway. positions in 2014. German opponents dominated the opposition scene, accounting for around 47% of oppositions filed. The proponents of the UPC speak of the avoidance of parallel They were followed in order by US, UK, Swiss and French op- litigation in Europe, but a successful EPO opposition may avoid ponents. The top 15 opponents of that year are in the adjacent the looming risk of litigation altogether. tables (see table 1), alongside the top 15 patentees receiving oppositions. Perhaps unsurprisingly, various companies routinely frequent both sides of the playing field and did so in 2014, with Users of the opposition system for example Procter & Gamble opposing around 50 patents and having around 80 of its own opposed. Similarly, Henkel op- Of course, the EPO opposition procedure itself is not new. The posed 100 patents that year and had around 22 of its own op- first European patents were granted in January 1980 and the posed. Note that Huawei ranks second in terms of the number first opposition was filed around a year later against EP0000056, of its patents opposed in 2014, indicative of the growing status itself granted in April 1980 to BASF. Since then the EPO op- of Chinese patentees in Europe. position system has grown enormously and it is worth looking at how it has been used in recent times. Further analysis indicates that some companies take a focussed approach to oppositions, filing large numbers of oppositions An analysis of the EPO’s Espace Bulletin DVD data suggests (and in a number of instances nearly all of their oppositions) that just over 3,000 patents were opposed in 2014, continuing against a single party. Other companies appear to have a more a steady increase from around 2,500 opposed patents in 2010. distributed strategy, with the Siemens group, BASF, Procter & There has been a general trend over at least the past 5 years of Gamble and Generics (UK) each spreading their oppositions 4% to 5% of granted European patents being opposed. over 20 to 40 different patentees. Generics (UK) holds some European patents but very few have ever been opposed. According to the EPO Annual Report, in 2014 US companies obtained the highest number of European patents (22% of the Looking at the countries of origin of EPO opponents, it is ap- total), followed by applicants from Germany (20%), Japan parent that over a third (around 130) of the European patents (17%), France (7%) and Switzerland (4%). Approximately half opposed by US opponents in 2014 were owned by US propri- of European patents were granted to non-European applicants, etors. UK opponents directed over 40% of their oppositions at with the modest number of patents granted to Chinese com- European patents owned by US proprietors. German oppo- panies continuing a rapid growth pattern. nents focussed the biggest proportion (around a third) of their

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oppositions on European patents owned by German propri- opposition appeal may be withdrawn in similar circumstances, etors, but opposed more European patents owned by US pro- immediately terminating the proceedings if all of the appellants prietors (around 340) than were opposed by US, UK and Swiss have withdrawn (but leaving the first-instance decision stand- opponents combined. ing).

It is difficult to be sure of course, but it appears that around 7% An opposition may also serve as a forum for testing prior art of the oppositions filed in 2014 were filed in the name of a nom- and arguments before they are used in corresponding proceed- inal or straw man opponent. Strawman Limited filed 22 oppo- ings elsewhere, within Europe or beyond. On the flip side, if a sitions against the same number of different patentees, whereas patent survives an EPO opposition – amended or not – the James Poole Limited seemed to focus its energies on Huawei. patent may be perceived as somehow strengthened and the prior art and arguments possibly considered tainted. The five most opposed European patents in 2014 had 10 or more oppositions filed against them, and are EP1286665 (17 oppositions), EP2061561 (15 oppositions), EP2292219 (13 For and against oppositions) and EP2137537 and EP2449070 (both receiving 10 oppositions). The first three of these are in the same IPC With the above in mind, here are some arguments for and class, namely A61K and relate to preparations for medical pur- against the EPO opposition procedure from a strategic point poses. The 17 oppositions against EP1286665 have already of view. been resolved – the patentee chose self revocation. • The EPO opposition system is well respected and generally considered predictable. The EPO Opposition Divisions On the subject of IPC class (see table 2), the distribution of op- and Boards of Appeal are experienced and include techni- posed patents across IPC sections A to H does not exactly mir- cally qualified members. The case law and procedure are ror that of granted patents. Only around 17% of patents granted well-established and largely settled. Within Europe, the in 2014 fell within IPC section A, but a higher percentage UPC is yet to prove itself. (around 26%) of 2014’s opposed patents fell within that section. • The invalidation rates for EPO oppositions (see pie charts) Conversely, around 19% of patents granted in 2014 fell within are lower than for example those widely reported in respect IPC section H, but only around 9% of patents opposed in 2014 of inter partes reviews at the USPTO. Nonetheless, around did. There appears to be a trend at the EPO that oppositions two-thirds of opposed European patents are cut-down in are relatively less common in the fields of “electricity” and scope or fully revoked by the conclusion of the procedure. “physics”, and relatively more common in the field of “human • The official fees are relatively low. The EPO fee for opposi- necessities”. tion proceedings is €775. The EPO appeal fee is €1,860. In contrast, the proposed UPC fee for revocation proceedings is €20,000, and the proposed UPC fee for appeal is €16,000. Uses of the system For further comparison, the USPTO inter partes review request fee (up to 20 claims) is $9,000, and the post-institution So what features attract parties to the EPO opposition proce- fee (up to 15 claims) is $14,000, totalling $23,000. The costs dure, and how do they measure up for the future? of an EPO opposition (including attorney fees) may also be compared to those of obtaining a legal opinion. Patents are typically considered a business asset and so EPO • The opposition procedure is administered by the EPO. It is oppositions are ostensibly filed based on a commercial interest. not a court procedure, and accordingly has a relatively un- Freedom to operate is key for business, and this is where an aggressive character which can be attractive for many parties. EPO opposition can play a role. There is minimal costs risk – there are no court costs and there is no direct risk of damages. The default position at Once an opposition is on file, the patentee must question the EPO is that the parties pay their own costs, whereas the whether the patent will survive at all, let alone with commer- default position at the UPC will be that the loser pays the cially useful scope. A filed opposition therefore serves as a po- other party’s costs (at least up to a limit). tential bargaining chip which may be leveraged to strategic • The opportunity to file an opposition – and pursue full rev- advantage in the future. With patents being freely transferrable ocation in a single procedure – is guaranteed. Any party objects of property, parties generally cannot be sure to whom other than the proprietor can file an opposition within nine they will belong – or how they may be used – in the future. months of grant (but not afterwards) according to Article 99 EPC. On the other hand, it will be possible to file an opt Some consider an EPO opposition as an unaggressive yet pow- out from the jurisdiction of the UPC at any time during the erful mechanism for testing the strength of a patent. Others lifetime of an existing or future classical European patent up compare it more directly to litigation. However it is perceived, until the end of the transitional period (at present seven an EPO opposition is a useful tool in worldwide licensing ne- years). It will also be possible to withdraw an opt out, effec- gotiations, and it is not uncommon for certain parties to rou- tively constituting an opt in (a possibility not open for na- tinely or batch oppose one another’s patents to influence the tional patents). Thus, absent an action brought before the balance of power. Oppositions may be withdrawn at any time, UPC or a national court, the proprietor will have some free- for example as a result of concluded negotiations, often termi- dom as to when to opt out or subsequently opt in. This will nating the proceedings if they are at an early stage or if the va- affect whether the jurisdiction of the UPC will be applicable. lidity is not seriously and unquestionably in doubt. An • The filing of an opposition places down a marker – a chance

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EPO states

I Member states (38) Italy Slovenia Albania Latvia Spain Austria Liechtenstein Sweden Belgium Lithuania Switzerland Bulgaria Luxembourg Turkey Croatia Malta United Kingdom Cyprus Monaco Czech Republic Former Yugoslav Republic I Extension states (2) Denmark of Macedonia Bosnia-Herzegovina Estonia Netherlands Montenegro Finland Norway France Poland I Validation states (1) Germany Portugal Morocco Greece Romania Hungary San Marino Iceland Serbia Ireland Slovakia

to have the patent revoked in its entirety (across its full geo- bounds, new prior art and arguments submitted by the op- graphical scope) in a single procedure. No other current or ponent may also be admitted during the procedure. The proposed procedure in Europe – with a single language of parties may therefore seek to adapt their cases, within limits, the proceedings and only requiring a single set of represen- as the procedure develops. The possibility of new amend- tatives – can guarantee this chance. The jurisdiction of the ments, new prior art and new arguments during the proce- UPC will not stretch beyond the EU. The UPC participants dure adds uncertainty for the parties. This uncertainty may do not currently include the EU states of Spain, Poland and be put to tactical advantage. Croatia, or naturally any of the non-EU states. • A series of requests (sets of claims) may be pursued at the • Filing an opposition on the other hand inevitably brings the EPO: a main request followed by a number of auxiliary or value of the patent to the attention of the (potentially oth- fall-back requests. How these are structured, and when they erwise unwitting) proprietor. It may attract unwanted atten- are submitted, will affect the chances of success for the pat- tion and bring with it a real risk of litigation that might entee. Generally, the earlier they are filed the better the otherwise have been a theoretical risk unlikely ever to come chance of them being admitted to the procedure. The later to bear. they are filed, the less notice the opponent will have. The • An EPO opposition may be filed in the name of a nominal opponent will have to consider all requests on file, and have or straw man opponent. Hiding the identity of the true op- in mind potential requests that may be filed. ponent may be important in some commercial situations. • Evidence at the EPO is primarily documentary, including If handled correctly, the use of a straw man or other dedi- prior art, opinions by experts and sworn statements. How- cated entity may also enable the opposition to be readily ever, the EPO will consider hearing witnesses, experts and transferred. Running a straw man opposition brings an as- of course the parties during oral proceedings. The EPO can sociated administrative burden for the true opponent. Ad- be meticulous in considering evidence, particularly in prior ditionally, the straw man status may affect the value that can use cases where the prior use must be proven up to the hilt. be attributed to the opposition by the true opponent, for ex- • The typical timescales for an EPO opposition are relatively ample in behind-the-scenes negotiations. long. At first instance, the majority of cases are resolved • The procedure only addresses the validity of the patent – within four years of patent grant (including the initial nine- the EPO does not concern itself with matters of infringe- month opposition term). If appealed, the majority of cases ment. This of course has advantages for the opponent. How- are resolved within eight years of patent grant. This may en- ever, unless the patent is revoked or sufficiently limited in able the parties to react to changing commercial situations scope, the procedure might not ensure that a conflict involv- during the pendency of an opposition, but puts the validity ing the patent is finally settled. of a patent in doubt (for both parties) for a considerable pe- • The benefit of experience at the EPO can inform strategy riod of time. The timescales for an EPO opposition are gen- adopted in other jurisdictions. Additionally, there is no erally considered to be too long. For many parties an early estoppel in Europe – unlike in the US – that would prevent resolution of a conflict – no matter the outcome – is better reuse of arguments or prior art. The arguments and prior than a protracted battle. Acceleration of the proceedings is art consequently might be faced again in the future. possible in certain circumstances. • Claim amendments may be filed by the proprietor and ad- • An EPO opposition can be filed on the basis of any or all of mitted to the proceedings at various stages. Within certain the grounds of opposition (Article 100 EPC). Not all

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EPO OPPOSITION STRATEGY

Table 1: Who are the main users of the EPO opposition system?

Opponent No. of oppositions Patentee No. of patents filed in 2014 opposed in 2014

1 Henkel AG & Co. KGaA 100 1 The Procter & Gamble Company 79

2 Siemens Group 97 2 Huawei Technologies Group 61

3 BASF Group 57 3 Siemens Group 58

4 Telefonaktiebolaget L M Ericsson (publ) 53 4 BASF Group 41

5 ENERCON GmbH 51 5 GE Group 29

6 The Procter & Gamble Company 51 6 Nestec S.A. 29

7 Generics [UK] Limited 48 7 Unilever 27

8 Fresenius Group 43 8 Mitsubishi Group 23

9 Nestec S.A. 41 9 Henkel AG & Co. KGaA 22

10 Evonik Group 40 10 Novartis Group 20

11 Giesecke & Devrient GmbH 36 11 Robert Bosch GmbH 20

12 Colgate-Palmolive Company 35 12 KCI Licensing, Inc. 19

13 SCA Hygiene Products Group 34 13 N.V. Nutricia 19

14 Mahle International GmbH 28 14 L’Oréal 18

15 Valeo Group 28 15 Bayer Group 17

Table 2: Division by IPC section

% of patents % of patents IPC section IPC section description opposed 2014 granted 2014

A 26% 17% Human necessities

B 24% 20% Performing operations; transporting

C 19% 17% Chemistry; metallurgy

D 3% 2% Textiles; paper

E 3% 3% Fixed constructions

F 8% 9% Mechanical engineering; lighting; heating; weapons; blasting

G 7% 13% Physics

H 9% 19% Electricity

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Opposition cases finally decided in 2014

Finally decided without appeal First instance decisions before appeal Decisions after appeal

Patent Opposition Patent Opposition Patent Opposition revoked rejected revoked rejected revoked rejected

Patent maintained Patent maintained Patent maintained in amended form in amended form in amended form

grounds need be relied upon. The opponent may also freely modest number of oppositions are filed in the name of a straw choose which prior art (if any) and arguments it forwards man (around 7% of those filed in 2014). For many companies in the opposition. For example, although generally not ad- there may be no perceived need for anonymity, and even a com- visable, an opposition could be based exclusively on formal mercial advantage attached to being known to have opposed. grounds, that is those not directly related to prior art such In such cases, the added administrative burden of setting up and as added matter. European patents are revoked purely on maintaining a straw man company or other dedicated entity such formal grounds in not insignificant numbers, and nor- may not be justified. The likelihood of needing to transfer an mally even though other grounds were asserted. Whether opposition may be very low. a revocation at the EPO on formal grounds gives the opponent sufficient comfort in other jurisdictions will depend Perhaps in the wake of non-practising entity or patent troll on the facts of the case concerned. activity in the US and the fears of such activity before the UPC, the number of straw man and other EPO oppositions The advantages and disadvantages of EPO opposition pro- will rise. Companies operating in areas at risk of troll activity ceedings will need to be compared against those of compara- may decide to attempt to clear out risk patents – for example ble systems around the world, including that of the upcoming at least have oppositions on file – before the UPC becomes UPC. Where an EPO opposition sits in a worldwide strategy operational. will differ from party to party, according to the surrounding business environment and culture, and from technical field to And to finish where we started, the proposed Unified Patent technical field. Court fee for revocation proceedings is €20,000, whereas the EPO fee for opposition proceedings is €775. Similarly, the proposed Unified Patent Court fee for appeal is €16,000, whereas Nominal opponents the EPO appeal fee is €1,860. The window of opportunity to oppose a European patent centrally at the EPO, whether unitary It will already be apparent that the ability to oppose in the name or not, is brief – nine months from grant. Anyone other than of a nominal or straw man opponent is an advantage of the EPO the proprietor can oppose, and straw man opponents are per- opposition procedure for opponents. mitted. Where there is a perceived risk, the opportunity should be seized with both hands. Use of a dedicated opponent company – such as a private limited company whose sole purpose is to act as an opponent – may serve to enable oppositions to be transferred freely as busi- © David Lewin 2015. The author is a partner of ness circumstances change (epi Information, 4/2012, page Haseltine Lake in Munich. Background data 120). The use of a straw man may also help to disguise the iden- analysis was provided by Jim Sunderland, of tity of the true opponent. counsel to the firm David Lewin Yet statistics show that, although on the increase, a relatively

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The 2015 PCT survey

Our annual report based on research by Inovia, a member of the RWS Group, reveals the top PCT filers in the major patenting jurisdictions and worldwide. To accompany the data, Kingsley Egbuonu investigates the truth about the so-called PCT surge

atent applicants interested in protecting their invention internationally often rely on two routes: Paris PCT SURVEY Convention and Patent Cooperation Treaty (PCT). The decision of course depends on the ap- CONTENTS plicant’s filing strategy. The PCT route is said to be more popular, especially for applicants interested 52 | EUROPE RANKINGS Pin obtaining protection in several countries, because it offers a 52 | WORLDWIDE RANKINGS longer time (18 months from the date of the international application) to make a decision on the countries or region in which 53 | FASTEST GROWING FIRMS to protect the invention (national or regional phase entry). 53 | NATIONAL RANKINGS Depending on the country or region, the deadline for national 68 | METHODOLOGY or regional phase entry can be 30 months (for example for Ger- many, China and Japan) or 31 months (for example for the EPO, Korea, and the UK) from the priority date of the application. It is common for those seeking protection in Europe to select the EPO.

The AIA surge

Among other things, the first-inventor-to-file (FITF) provisions of the America Invents Act (AIA) came into force on March 16 2013. Patentees who wished to avoid the new rules had until March 15 2013 to file their patent applications so as to remain under the pre-AIA regime. It is believed that many US patentees submitted their initial patent applications, including provisionals, in the weeks and days leading up to and on March 15 2013. In 2013 the total number of patent applications received by the USPTO was 601,464, of which 177,942 were provisionals. The USPTO confirmed that it witnessed a dramatic spike in Continued on page 54

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EUROPE WORLD RANKING PCT APPS FIRM NAME RANKING PCT APPS FIRM NAME

1 u 550 Marks & Clerk 1 u 1,800 inovia, a member of the RWS Group 2 p 394 REGIMBEAU 2 u 1,551 Shiga International Patent Office 3 u 387 Cabinet Plasseraud 3 u 1,310 Sakai International Patent Office 4 q 385 LAVOIX 4 p 1,026 Liu Shen and Associates 5 u 332 Epping Hermann Fischer 5 p 840 Fish & Richardson P.C. 6 u 326 ZACCO 6 p 825 Kilpatrick Townsend & Stockton LLP 7 p 299 Cabinet Beau de Loménie 7 q 803 China Pat Intellectual Property Office 8 u 261 V.O. 8 p 782 Knobbe Martens Olsen & Bear LLP 9 u 260 Awapatent AB 9 q 747 Eikoh Patent Firm 10 p 245 Dehns 10 q 739 Kangxin Partners, P.C. 11 q 235 BREVALEX 11 p 692 AFD China Intellectual 12 NEW ENTRY 223 Bugnion S.p.A. Property Law Office 13 NEW ENTRY 219 Berggren Oy Ab 12 p 691 KBK & Associates 14 q 211 Nederlandsch Octrooibureau (NLO) 13 p 644 Marks & Clerk 15 NEW ENTRY 200 Grünecker 14 NEW ENTRY 576 Leader Patent & Trademark Firm 16 q 194 HGF 15 q 570 Miyoshi & Miyoshi 16 p 194 Studio Torta S.r.l. 16 p 565 Foley & Lardner LLP 18 p 193 Cabinet Germain & Maureau 17 q 563 SOEI Patent and Law Firm 19 q 192 Jacobacci & Partners S.p.A. 18 NEW ENTRY 561 Schwegman, Lundberg

20 NEW ENTRY 191 D Young & Co & Woessner, P.A.

19 NEW ENTRY 504 Unitalen Attorneys at Law 20 q 468 Harakenzo World Patent & Trademark

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FASTEST GROWING RANKING PCT APPS FIRM NAME COUNTRY % CHANGE

1 27 Anand and Anand India 145% 2 34 OK pat AG Switzerland 143% 3 32 BOHEST AG Switzerland 129% 4 27 De Penning & De Penning India 125% 5 71 André Roland SA Switzerland 103% 6 51 D. Kligler IP Services Ltd. Israel 96% 7 454 Advance China IP Law Office China 81% 8 380 Beijing San Gao Yong Xin Intellectual Property Agency Co.,LTD China 76% 9 49 Hill & Schumacher Canada 75% 10 320 Cooley LLP United States 73% 11 29 Vilage Marcas e Patentes Brazil 71% 12 130 Page White and Farrer United Kingdom 69% 13 15 Atem & Remer Assessoria e Consultoria Propriedade Intelectual Brazil 67% 14 182 Mewburn Ellis United Kingdom 60% 15 87 Kransell & Wennborg Sweden 58% 16 89 Phillips Ormonde Fitzpatrick Australia 56% 17 200 NAWOO Patent & Law Firm South Korea 55% 18 1026 Liu Shen and Associates China 52% 18 38 Oficina Ponti Spain 52% 18 423 Wolf Greenfield & Sacks, P.C. United States 52%

AUSTRALIA RANKING PCT APPS FIRM NAME

1 p 185 Griffith Hack 2 q 173 Davies Collison Cave 3 u 101 FB Rice 4 p 89 Phillips Ormonde Fitzpatrick 5 q 72 Spruson & Ferguson 6 u 69 Wrays 7 p 67 Cullens 8 u 62 Shelston IP 9 q 60 Fisher Adams Kelly

10 NEW ENTRY 58 Freehills Patent Attorneys

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BRAZIL CANADA RANKING PCT APPS FIRM NAME RANKING PCT APPS FIRM NAME

1 u 59 Dannemann, Siemsen, Bigler 1 u 240 Gowlings & Ipanema Moreira 2 u 181 Norton Rose Fulbright 2 u 36 Daniel Advogados 3 p 163 Bereskin & Parr 3 p 29 Vilage Marcas e Patentes 4 p 122 Smart & Biggar/Fetherstonaugh 4 p 21 Kasznar Leonardos Propriedade 5 q 109 Ridout & Maybee LLP Intelectual 6 q 105 Borden Ladner Gervais LLP 5 q 18 Veirano Advogados 7 u 79 ROBIC, LLP 6 q 16 Pinheiro, Nunes, Arnaud 8 p 65 Oyen Wiggs Green & Mutala LLP E Scatamburlo Advogados 9 p 51 BCF 7 p 15 Atem & Remer Assessoria e 10 NEW ENTRY 49 Hill & Schumacher Consultoria Propriedade Intelectual

8 q 12 Gaiarsa, Ferreira & Meyer

9 NEW ENTRY 8 Barbosa Müssnich Aragão 10 q 6 Cruzeiro/Newmarc Propriedade Intelectual

10 NEW ENTRY 6 TINOCO SOARES Sociedade de Advogados

10 NEW ENTRY 6 Beerre Marcas & Patentes

10 NEW ENTRY 6 Atem & Sá

10 NEW ENTRY 6 Provedel Advogados

Continued from page 50 applications in March 2013, many of which are believed to have been as a result of the FITF implementation.

Twelve months later (March 2014), the USPTO experienced yet another spike in application numbers, many of which were said to be PCT applications claiming priority to the initial patent applications filed in March 2013. Some of these applications may be direct Paris Convention applications. This is what translation companies referred to as AIA surge.

AIA foreign filing aftershock

For patentees with applications with a priority date of March 2013, the deadline to enter the national or regional phase will be September or October 2015 (the 30-month and 31-month deadlines respectively). Two translation companies expect a similar trend in application numbers in foreign patent offices, as seen at the USPTO in March last year.

Morningside IP said in an article: “[T]he total number of PCT applications filed at the US receiving office in March 2014 was 62% higher than average. As a result, a similar surge in national phase filing is expected this September and October.” In an article, Park IP Trans- lations predicted: “Over 9,000 applications are due for filing in Sep- tember alone, before this deadline. The number of applications due on September 15 is estimated to be over 5,700, more than 20 times the daily average.” Continued on page 59

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PCT SURVEY RANKINGS

CHINA FINLAND RANKING PCT APPS FIRM NAME RANKING PCT APPS FIRM NAME

1 p 1026 Liu Shen and Associates 1 p 219 Berggren Oy Ab 2 q 803 China Pat Intellectual Property Office 2 q 183 Kolster Oy Ab 3 q 739 Kangxin Partners, P.C. 3 p 91 Seppo Laine Oy 4 u 692 AFD China Intellectual Property Law 4 u 83 Papula-Nevinpat Office 5 p 41 Espatent Oy 5 p 576 Leader Patent & Trademark Firm 6 p 39 Genip Oy 6 p 504 Unitalen Attorneys at Law 6 p 39 Boco IP Oy Ab 7 NEW ENTRY 454 Advance China IP Law Office 8 u 31 Heinänen Oy 8 q 448 China Patent Agent (H.K.) LTD 9 NEW ENTRY 20 Leitzinger Oy 9 q 426 King and Wood Mallesons 9 NEW ENTRY 20 IPR Partners Oy

10 NEW ENTRY 380 Beijing San Gao Yong Xin Intellectual Property Agency Co.,LTD

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FRANCE GERMANY RANKING PCT APPS FIRM NAME RANKING PCT APPS FIRM NAME

1 p 394 REGIMBEAU 1 u 332 Epping Hermann Fischer 2 u 387 Cabinet Plasseraud 2 p 200 Grünecker 3 q 380 LAVOIX 3 p 189 Meissner Bolte 4 p 286 Cabinet Beau de Loménie 4 q 184 Hoffmann Eitle 5 q 235 BREVALEX 5 q 182 Boehmert & Boehmert 6 u 193 Cabinet Germain & Maureau 6 p 153 Eisenführ Speiser 7 q 169 NONY 7 p 151 Cohausz & Florack 8 p 136 Marks & Clerk France 8 NEW ENTRY 149 Reitstötter Kinzebach 9 q 134 Cabinet Schmit-Chrétien 9 q 143 Isenbruck | Bösl | Hörschler LLP 10 NEW ENTRY 128 Cabinet Orès 10 q 142 Maiwald Patentanwalts GmbH

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Continued from page 54 worldwide, with around 27% of the total NPEs. The US was also the leading country for NPEs. The top 10 offices in which Concerns over translation services US-originating PCT applications entered the national phase, excluding the USPTO, were: EPO (24,204); China (18,019); Of particular concern for translation companies are the US-origi- Japan (13,728); Korea (11,060); Canada (12,179); Australia nating PCT applications due for national or regional phase entry (8,996); India (8,599); Brazil (7,668); and Russia (3,295). in major jurisdictions which require them to be translated. “This is Outside this group was Mexico with 5,241 applications (see the point at which most applicants face the deadline for filing their figure 5). With the exception of the EPO, Canada, India and applications in some of the world’s most important markets, includ- Australia, US-originating PCT applications entering these other ing Japan, China, South Korea, Brazil, Mexico, and Russia. There countries this year will need to be translated. are many more applications filed in each of these countries than in any of the ‘non-PCT’ jurisdictions mentioned above; this is the stage where the biggest part of the AIA’s foreign filing ‘aftershock’ What practitioners think will be felt,” Matthew Sekac of Park IP Translations explained. The consensus among the patent practitioners we interviewed Accuracy is important when translating foreign-filed patents was that any translation concern as a result of the AIA surge may because errors in claims and specifications may render the be more of an issue for those applications entering countries out- patent vulnerable during prosecution or enforcement. “Patent side Europe and countries whose offices do not have English as translation is a labour-intensive process, and patent translators a working language. Even though national phase entries into Eu- are a scarce and valuable resource,” said Sekac. ropean countries such as Germany and Spain require translation, they did not think that this would be much of a problem. This is why translation companies began a campaign to warn against delaying the decision on national phase entry until the “I suspect that the translation companies’ view is based on the last minute’ “Turnaround times could take longer, prices may number of translators they have available for a particular lan- be higher, and quality of work may be impaired,” warned Morn- guage. I don’t think that Europe will be much of a problem at ingside IP. An article by Park IP Translations explained the ben- all for US filers or even non-US filers who have been using US efits of early instruction: “By making filing decisions and counsel for their PCT applications because those applications initiating any required translations in advance, firms will ensure are most likely filed in English,” said McDonell. that they get access to the proper, qualified resources, at normal price points, and make the deadline.” Others agreed. For example, Whitlock said: “It is common for US-originating PCT applications to proceed at the EPO since Leslie McDonell, a partner based in Finnegan’s Boston office, it covers the EPC countries.” Christian Appelt, a patent attorney commended the campaign. “It’s good they’ve alerted the indus- at Boehmert & Boehmert, added: “US-originating PCT appli- try about this so people can start thinking about it and if need cations to be handled by the EPO will not need to be translated. be make alternative arrangements,” she said. However, translation is required for Germany and must be filed within the 30-month deadline.” It is clear that there was a significant rise in applications at the USPTO in 2013, and subsequently in 2014. However no-one Sekac of Park IP Translations did not disagree. “We are more con- yet knows how many of these US-originating PCT applications cerned about these US-originating applications entering countries will enter the national or regional phase this month or next in such as China, Japan, Korea and Russia. Regional entry in Europe major jurisdictions such as China, Japan and Korea. “The scale ie EPO is not a problem as translation will not be required. How- of the problem will obviously depend on whether these appli- ever, Euro-originating PCT applications going into the countries cations enter the national or regional phase,” said Holly Whit- I have just mentioned will require translation and would add to lock, partner at RGC Jenkins in London. The same can be said the likely increase in demand for translation services,” he said. of other applications from other parts of the world, PCT or otherwise, that require translation. Therefore one can only specu- Richard Clegg, patent attorney and partner at Mewburn Ellis late as to the numbers and possible ramifications. in the UK, thinks that translation companies will have already made their plans. “I see that several translation companies have been following this issue and presumably have put in place What WIPO’s statistics tell us measures to cope with any surge,” he said.

WIPO’s 2015 statistics estimates that 214, 500 PCT applications were filed worldwide in 2014 (a 4% increase on filings in Should patent applicants be worried? 2013). The USPTO received the highest number of PCT applications, followed by the Japan Patent Office (JPO), Euro- The obvious advice, from both translation companies and patent pean Patent Office (EPO), State IP Office of China (SIPO) and practitioners, was to plan in advance and give instructions on na- Korean IP Office (KIPO). The statistics on PCT national phase tional phase entry well ahead of the deadline to avoid scrambling entries (NPEs) could provide a clue as to what may happen this for translation services, if needed. This is easier said than done for year with US-originating PCT applications. various reasons. In the event that translation becomes an issue, practitioners said there are options available to applicants. In 2013 US applicants led the table of NPEs initiated Continued on page 63

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INDIA RANKING PCT APPS FIRM NAME

1 u 98 K & S Partners 2 p 68 LexOrbis 3 u 65 R. K. Dewan & Co. 4 q 64 Lakshmikumaran & Sridharan 5 q 45 S. Majumdar & Co. 6 p 30 Lall Lahiri & Salhotra 7 NEW ENTRY 27 Anand and Anand

7 NEW ENTRY 27 De Penning & De Penning

7 NEW ENTRY 27 Global IP Services 10 q 26 Subramaniam, Nataraj & Associates

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ITALY RANKING PCT APPS FIRM NAME

1 p 223 Bugnion S.p.A. 2 u 194 Studio Torta S.r.l. 3 q 184 Jacobacci & Partners S.p.A. 4 u 154 Barzanò & Zanardo 5 p 126 Notarbartolo & Gervasi S.p.A. 6 p 124 Società Italiana Brevetti 7 q 100 Modiano & Partners 8 p 74 Bianchetti Bracco Minoja S.r.l. 9 q 61 GLP S.r.l.

10 NEW ENTRY 57 Buzzi, Notaro & Antonielli d'Oulx S.r.l.

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ISRAEL RANKING PCT APPS FIRM NAME

1 u 176 Reinhold Cohn & Partners 2 u 164 Ehrlich & Fenster 3 u 112 Pearl Cohen Zedek Latzer Baratz 4 p 81 Luzzatto & Luzzatto 5 q 67 Webb & Co. 6 p 62 Sanford T. Colb & Co. 6 u 62 Dr. Mark Friedman Ltd.

8 NEW ENTRY 51 D. Kligler IP Services Ltd. 9 q 50 Dr. Eyal Bressler & Co. 10 q 40 Ben-Ami & Associates

Continued from page 59 the national or regional phase are payment of agreed with this observation. “When you are fees and, if required, translation of the applica- looking at just under €3,500 in fees per applica- “We understand the translation companies’ con- tion. Provided the fees are paid, most offices do tion then it might cause a problem. This depends cerns but don’t necessarily have the same concerns have explicit provisions allowing applicants on the size of the firm,” he said. ourselves. There are various translation companies more time, if needed, to supply the required around, and some firms use local counsel in those translated international application. However, Whitlock sees this as an opportunity countries to do their translation for them, so this for both translation companies and patent can be called upon if need be,” said McDonell. “Many countries have a grace period of 1-2 firms. “I think patent attorneys in the major ju- months for filing translations,” said McDonell. risdictions will see this as a business opportu- If you have to use local counsel, then choose Japan is one of those countries, and Korea re- nity rather than a problem,” she said. carefully. “The increased risk of mistakes and cently relaxed its rules. The national phase entry other issues as a result of the high volumes make deadline in China may be extended by up to Practitioners who commented on what they have it even more important for applicants to choose two months. Other important emerging mar- heard from their peers in some of the countries in high quality local attorneys,” Whitlock advised. kets such as Brazil and Mexico also have grace question said no serious concerns were expressed. periods. There is also the possibility to request Naoki Yoshida, a partner in Finnegan’s office in The same caution is given to those who will be an extension of time in Russia. All these grace Tokyo, said: “Generally I do not share the same using the services of a translation company for periods may be subject to a fee, and practition- concerns as the translation companies have de- the first time. McDonell said: “Translations are ers cautioned against over-reliance. scribed in their articles. Having said that, I believe obviously critical. Different technologies can be that quality translators, especially in the field of difficult to translate and translators learning a patents, are limited and I would not be surprised if second language may find some terms difficult. Should patent attorneys those high quality translators face a flood of work If you’re going to a new translation company be concerned? that they may not be able to complete in time.” then put in place a quality assurance or review mechanism. Be prepared to get a secondary re- “For firms in Europe, I think cash flow may be the view on your translations.” most relevant issue. Patent attorney firms need to Can patent offices handle ensure their deposit accounts with the EPO are the surge? well-funded. Some firms may require early warn- The saving grace ing so they can put money aside for costs associ- Practitioners did not see any major reason why ated with regional phase entry,” said Nick Wallin, patent offices should not cope, since all they will The two most important requirements to enter partner at Withers & Rogers in London. Clegg Continued on page 70

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JAPAN THE NETHERLANDS RANKING PCT APPS FIRM NAME RANKING PCT APPS FIRM NAME

1 u 1,551 Shiga International Patent Office 1 u 261 V.O. 2 u 1,310 Sakai International Patent Office 2 u 211 Nederlandsch Octrooibureau (NLO) 3 u 747 Eikoh Patent Firm 3 u 166 Arnold + Siedsma 4 p 570 Miyoshi & Miyoshi 4 u 107 Exter Polak & Charlouis B.V. (EP&C) 5 q 563 SOEI Patent and Law Firm 5 u 85 De Vries & Metman 6 p 468 Harakenzo World Patent & Trademark 6 p 39 Patentwerk B.V. 7 u 462 Aoyama & Partners 7 q 38 AOMB IP Consultants 8 q 444 Fukami Patent Office, p.c. 8 p 33 Octrooibureau Los & Stigter 9 p 408 Taiyo, Nakajima & Kato 9 u 26 Vriesendorp & Gaade B.V. 10 p 377 Suzuye & Suzuye 10 NEW ENTRY 18 Haseltine Lake LLP 11 p 367 ITOH International Patent Office 12 p 360 ONDA TECHNO Intl. Patent Attys. 13 NEW ENTRY 354 GOTOH & PARTNERS

14 NEW ENTRY 326 Seiwa Patent & Law

15 NEW ENTRY 322 SUGIMURA International Patent & Trademark Attorneys

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RUSSIA NEW TO SURVEY RANKING PCT APPS FIRM NAME

1 64 Gorodissky & Partners 2 22 Gowlings 3 21 Oleg Tikhonenko 4 19 Express Patent 5 18 Gardium Federal Patent Bureau 6 16 PATENTICA 7 15 Sojuzpatent 8 12 Ermakova, Stoliarova & Partners Patent Agency 8 12 Patent and Law Firm YUS 10 11 YUSTIS Patent and Law Firm

SINGAPORE NEW TO SURVEY RANKING PCT APPS FIRM NAME

1 123 Spruson & Ferguson 2 122 Viering, Jentschura & Partner 3 94 Marks & Clerk 4 53 Amica Law LLC 5 34 Allen & Gledhill 6 24 Yusarn Audrey 7 21 Axis Intellectual Capital Pte Ltd 8 18 Drew & Napier 9 16 Bird & Bird 10 15 McLaughlin IP Pte. Ltd.

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SOUTH KOREA SPAIN RANKING PCT APPS FIRM NAME RANKING PCT APPS FIRM NAME

1 u 691 KBK & Associates 1 p 117 PONS Patentes y Marcas 2 p 434 Y.P. Lee, Mock & Partners 2 u 113 ABG Patentes 3 u 408 K. J. Lee International Patent 3 q 109 Ungria Patentes & Marcas & Trademark Office 4 p 102 Herrero & Asociados 4 q 407 S&IP Patent & Law Firm 5 p 72 Clarke, Modet & Co. 5 p 289 YOU ME Patent & Law Firm 6 q 71 ZBM Patents & Trademarks 6 q 255 Yoon & Lee International Patent 7 q 61 Garrigues IP & Law Firm 8 p 47 J. Isern Patentes y Marcas 7 NEW ENTRY 200 NAWOO Patent & Law Firm 9 NEW ENTRY 38 Oficina Ponti

8 NEW ENTRY 159 DANA Patent Law Firm 10 q 33 Elzaburu

9 NEW ENTRY 156 DAE-A Intellectual Property Consulting

10 NEW ENTRY 149 PLUS International Patent Law Office

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PCT SURVEY RANKINGS

SWEDEN SWITZERLAND RANKING PCT APPS FIRM NAME RANKING PCT APPS FIRM NAME

1 u 206 Awapatent AB 1 u 74 P&TS Ltd 2 u 188 Zacco Sweden AB 2 p 71 André Roland SA 3 u 162 Valea AB 3 u 55 Hepp Wenger Ryffel AG 4 u 97 Brann AB 4 p 46 E. Blum & Co. Ltd. 5 u 93 Ström & Gulliksson AB 5 q 45 Rentsch Partner Ltd. 6 p 87 Kransell & Wennborg 5 u 45 Troesch Scheidegger Werner AG 6 u 87 Bergenstråhle & Partners 7 q 40 Isler & Pedrazzini AG 8 p 42 Aros Patent AB 8 NEW ENTRY 34 OK pat AG 9 q 37 Hynell Patenttjänst AB 9 NEW ENTRY 32 BOHEST AG 10 NEW ENTRY 36 Noréns Patentbyrå AB 10 q 30 Frei Patent Attorneys

Methodology

The tables over the preceding pages listing the top PCT filers jurisdiction. Firms are compiled based on how they are rank firms according to the number of PCT applications that listed on the patent application. they filed that were due for national stage entry during 2015. The worldwide table ranks the firms with the most PCT ap- The tables are based on details of PCT applications pub- plications globally. This compiles the filings of a firm’s var- lished on WIPO’s website. To compile the tables, PCT appli- ious offices around the world, increasing the ranking for cations with a priority date between July 1 2012 and June firms in several locations. 30 2013 were extracted. These correspond to applications due to enter the national phase from January 1 to Decem- Managing IP acknowledges the help of inovia, a member ber 31 this year. of the RWS Group, in compiling and verifying the data on which the tables are based. Comparable statistics relating Once extracted, these applications were sorted according to to the number of PCT applications inovia will introduce into the law firm or patent agency that filed the PCT application, the national stage this year are included in the relevant ta- based on the “agent name” and “agent address” categories bles. Although not a law firm, it is by far the biggest service in the PCT form. A manual checking process ensured that provider for national stage filings. Other service providers all cases filed by each firm were included, even where it also introduce PCT applications into the national phase, but used different names or addresses during the period in their numbers are not included here. question. The tables are provided for readers’ information only. Man- The firms are listed in order of the number of applications aging IP does not recommend or endorse any particular filed in their jurisdiction. Firms with offices in more than firms for PCT or other work. The arrows in each table indicate one country may be included in the table in each the firms’ relative positions compared to 2014.

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UNITED KINGDOM RANKING PCT APPS FIRM NAME

1 u 411 Marks & Clerk 2 p 245 Dehns 3 q 194 HGF 4 p 191 D Young & Co 5 p 182 Mewburn Ellis 6 u 156 Withers & Rogers LLP 7 u 142 Boult Wade Tennant

8 NEW ENTRY 130 Page White and Farrer 9 q 127 Venner Shipley LLP

10 NEW ENTRY 123 Potter Clarkson 11 p 122 Kilburn & Strode 12 q 111 J A Kemp

13 NEW ENTRY 110 Barker Brettell LLP 13 q 110 EIP 13 q 110 Gill Jennings & Every LLP

UNITED STATES Continued from page 63 RANKING PCT APPS FIRM NAME be doing at is to accept the application together with the necessary documents and fees. As noted above, patent attorneys in Europe are quite 1 u 1,800 inovia, a member of the RWS Group relaxed about the AIA surge, and rightly so. 2 p 831 Fish & Richardson P.C. 3 u 825 Kilpatrick Townsend & Stockton LLP One practitioner reminded us that in 2010 the EPO had its own surge when it saw a spike in divisional applications following changes in rules. 4 u 781 Knobbe Martens Olsen & Bear LLP “The EPO will have learned from their experience a few years ago. I also 5 p 565 Foley & Lardner LLP suspect that the patent offices in Japan, Korea, and China will cope,” said 6 p 561 Schwegman, Lundberg & Woessner Whitlock. P.A. Appelt said: “The German Patent Office should not have a problem 7 p 453 Perkins Coie LLP handling the likely rise in PCT-based applications in September 2015. 8 q 449 Blakely Sokoloff Taylor & Zafman This should also be the case for the EPO.” Wallin’s view is the same, and 9 p 443 McDermott Will & Emery he predicts a likely drop in applications after next month. “In the grand 10 q 426 Cantor Colburn LLP scheme of things it [AIA foreign filing aftershock] is not that huge over 11 p 425 Wolf Greenfield & Sacks, P.C. a 12-month period. Whatever percentage increase is expected, I suspect it will be followed by a drop,” he said. There will be an impact from a fi- 12 p 415 Carlson, Gaskey & Olds, P.C. nancial perspective. “Patent offices will get a big chunk of fees slightly 13 p 373 Baker Botts LLP earlier,” he added. 14 q 366 Wilson Sonsini Goodrich & Rosati 15 q 352 Patterson & Sheridan, L.L.P. We should have a rough idea of the scale of the AIA foreign filing aftershock concern when WIPO publishes its PCT national phase entry sta- 16 u 349 Shumaker & Sieffert, P.A. tistics in 2017.bUntil then, the likelihood is that patent offices should 17 q 331 Harness, Dickey & Pierce, PLC cope with any likely AIA foreign filing surge, and patent practitioners 18 NEW ENTRY 320 Cooley LLP and their clients have options in the event they encounter difficulties in 19 NEW ENTRY 314 Lowe, Hauptman & Ham LLP obtaining appropriate translation services. As one practitioner told us: “I really don’t know how much of a surge there will really be. Some, cer- 20 NEW ENTRY 313 Baker & Hostetler LLP tainly. But not enough to cause a panic.”

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Spain cracks down on IP crime

Changes to the Spanish criminal code, related to online piracy, copyright infringement and anti-counterfeiting activities, together with big operations conducted by the authorities will change the way the country tackles IP crime. Núria Ribera Casellas reports

n July 1 this year, amendments to the Spanish criminal code came into force, some of them affecting IP rights. Practitioners believe the changes were the result of efforts to regulate illegal behaviours that were out of the scope of the written law, mainly due to the development Oof new technologies. One of the highlights is that the requirement for “lucrative intent” has been changed to “direct or indirect economic benefit”, explained Ignacio Temiño, a partner at Abril Abogados. He told Managing IP: “This is the result of long discussions between scholars and experts. The former legal requirement, lucrus an- imus, meant literally making money out of [the illegal distribution or production of copyrighted material]. Those who were allowing downloading of these materials for free and then having banners and ads in their website, were benefiting from it but was outside of the scope of the criminal code. This new amendment finalised many discussions on the topic.”

The amendments now cover not only the work but also its performance or demonstration, as well as digital copies of works. Additionally, Álvaro Bourkaib from Uría Menéndez explained that “a main highlight, certainly a concern in all jurisdictions, is the linking activity. Although it was partially resolved by the CJEU with Svenssonand other case law, the recent amendments in Spanish law provide new tools to deal with linking.”

Bourkaib explained: “It is difficult to identify who is behind [hy- perlinking activities], and it has been well-discussed whether it is communication to the public or not. Now there is a paragraph in these specific amendments that refers to linking.” This new

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of increasing the maximum prison sentence for online copy- Enforcement case studies right infringement to 10 years.) Judges will have to consider new circumstances when assessing the crime, having overall online piracy: series.ly owners were arrested during the summer, as more power of decision-making. reported by la Coalicion. the website and business was a complex network of streaming and downloading services of tV series and movies. Nonetheless, Duch said that “it is very unlikely for the defendant the police said that its total economic benefit in three years might to go to prison, thus if fines are reduced people might get more have been more than €600,000. into these activities. They will have less to lose”.

a case regarding rojadirecta.com is continuing. this popular spanish Nonetheless, representatives from the industry say that the new website was created in 2005 and provided links to several live sports regulations are not being sufficiently applied, in particular re- events. it was particularly used to watch football matches. on June 16, garding online piracy. the madrid courts ordered the immediate cessation of the linking activities. nevertheless, this is still a preliminary injunction. Being easier said (or written) than done, the country’s authorities are making a great effort to enforce these measures. The Counterfeits: according to spanish newspaper el País, the authorities Spanish police force is organised in several special units, one of have taken down a large plot of Chinese bazaars that was operating in the them being in charge of the investigation and prosecution of IP country. it was a massive operation for money laundering, which involved crime. Another unit is the Brigade of Technological Investiga- the commercialisation of goods that were infringing many iP rights. tions, which works to ensure online safety.

Does it all end up in a trial? Bourkaib explained how to bring a law suit in Spain: “It is usually done privately, being the company who initially files a criminal action to court.” He added: “The landscape in criminal law comes after the Spanish changes to police may find a lead and start investigations, which would be Intellectual Property Law earlier this year. followed by court proceedings. Alternatively, the public prose- cutor [can trigger legal procedures as well].”

Anti-counterfeiting measures José Manuel Tourné, General Director of FAP (the Spanish Federation for the Protection of Intellectual Property), ex- The amendments to the criminal code also affect the so-called plained that the federation usually works with the police and industrial property rights. “[The newly defined crime of] unau- others affected by these illegal activities, and they also collabo- thorised economic exploitation is going to help our day to day rate with La Coalicion de Creadores e Industrias de Contenidos work,” said Cristina Duch from Baker & McKenzie. “Especially (an association representing the media, music, editorial and in the fashion industry, where we work extensively, it will help videogames industries) to produce reports about the current preventing counterfeits in designs. In most of the cases we have, national landscape in copyright infringement. the defendants are wholesalers of these designs. [In order to plead against them], we had to provide explanations to courts However, “it is usually those who own film and videogame all the time with case law and acting using analogy.” stores that complain to the authorities and point to the right direction for the police forces to stop illegal activities. This is be- “It was common practice, but to have it in writing is very im- cause they are the ones directly suffering the [economic] portant in our jurisdiction,” said Duch. consequences of piracy” said Tourné.

Tourné said that FAP’s “main goals are three: implement ade- Street vending versus major offences quate regulations; apply these measures; but most of all it is of paramount importance to educate society on the relevance of The distribution or commercialisation through street vending intellectual property rights.” He said the recent changes are wel- or occasional sale is now defined as a slight offence, differenti- come for at least three reasons: ating it from wholesale and retail distribution. 1. “The transposition of European Directives has not been entirely accurate in relation to copyright, and [Spain was] left “The wholesale, retail and street vending distinction was already behind compared to the rest of the European countries”. applied to industrial property, so it is not entirely new,” said Temiño. These amendments will probably help the country align The proposal, in his opinion, was meant to prevent prison sen- with other countries. tences for vendors, since the proportionality of the articles and the 2. After the criminal law amendments, “now the government extent to what this behaviour would amount to a criminal offence should send a clearer message against the infringement of had been long-discussed. Cristina Duch, however, posits that “in IP rights, as many other presidents and prime ministers have the end, wholesalers and manufacturers are clients’ main concerns.” done so far”. 3. “Increasing people’s awareness is of paramount importance, On the other hand, the amendments have reduced the value of much more than the application of criminal law”. fines while increasing prison sentences. Now aggravated behaviour can lead to up to six years in prison. (Although this might “The first step is to inform, then require to comply with the reg- seem a lot, countries such as the UK are studying the possibility ulations,” said Tourné.

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The view from inside the UPC courtroom

Over the past year lawyers at London firm Bristows have staged a comprehensive mock Unified Patent Court case. Alan Johnson explains the lessons learned while James Nurton interviews some of the participants

ver since the UPC Agreement was signed in February 2013, various moots have been organised under UPC Rules, to demonstrate the pos- MINUTE sible course of oral hearings under the new READ system. Worthy as these have been, they do not 1 give a flavour of UPC litigation as a whole: the Etactics and the possible interpretations of the rules which Although the UPC Agreement was will be so important in determining the shape of the system. signed more than two-and-a-half For that reason, the patent litigation team at Bristows de- years ago, and the Rules of Proce- cided to invest a large amount of time in running a mock dure have now been through 18 real time action. A scenario was devised and two teams of drafts, there remains much uncer- lawyers (two partners and three associates) were given brief- tainty over how cases will be han- ing packs. The other seven patent litigation partners and a dled by the new Court. To put the similar number of associates were given roles as judges, wit- Agreement and Rules to the test, nesses or potential witnesses (expert and of fact). The pro- Bristows law firm created a mock ceedings kicked off in late April 2014 and the final oral case, based on a pharmaceutical hearing took place 15 months later in July 2015. So what patent, and staged proceedings emerged from the exercise? from initial filing through to trial and ultimately judgment over a 14- One of the ground rules of the proceedings was that there month period. The experience pro- should be no national proceedings. Hence, possible tactics vided some valuable lessons, not using the transitional provisions of Article 83 were prevented. least about the strategies that both However, UPC form shopping remained possible. The sce- patent owner and defendant can nario was that the owner of a second medical use patent had adopt to turn proceedings to their threatened proceedings in the UPC against a generic infringer. advantage, and the pivotal role The response of the generic was to apply itself in the UPC played by the judge rapporteur. central division for revocation. Why might it have done so? One answer is to avoid the patentee potentially bringing its proceedings in a local division of its choice given the flexibility in the agreement and Rules for selection of any number of different local and regional divisions. This highlights one important difference from the current system in Europe. At present

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patent proceedings involving validity issues can only be Vanessa Rieu, judge rapporteur: brought in a court in the state where the patent is registered. While torpedo proceedings remain a potentially complicating There is emphasis on case management in the rules, factor, there is no possibility to seise the jurisdiction of one and a lot of flexibility in what the Court can order: I national court at the expense of another where validity is in was surprised at the amount of flexibility. I went with issue. In the UPC, however, a different regime applies. There my instinct and a little bit with my French back- is a single court, but with multiple divisions which will have ground. But when I thought there was something we judges of different nationalities, and which are therefore should really discuss then I referred the point to the widely expected to behave differently according to local tra- panel. ditions depending on the exact composition of the panels, particularly as regards interpretations of procedural rules. At one point, I felt I had to take a strict approach. I saw Hence even ignoring the added complications of the Article that it was more than three months since the evidence 83 transitional provisions which bring national proceedings was first referred to, and even longer since it had been into play as well, the UPC system itself promotes a shoot-first referred to in a prior-filed protective letter. It seemed to approach as regards choice of division. me that the claimant had prepared the evidence but held it back to gain a procedural advantage. There is The patentee did not take this lying down, however, and in- not just rule 172, but also rule 20 which gives the deed the generic company’s tactic did not work. The patentee judge rapporteur the power to give instructions to the chose not to counterclaim for infringement in the central di- parties as to the next steps in the proceedings, and vision proceedings, but instead started its own separate in- that is exactly what I did: I instructed them to file the fringement proceedings. As it happened, these were brought evidence. in the London local division. This gave rise to a complex situation with two highly connected sets of proceedings. This situation is provided for in the Agreement and Rules, the essence of which is that the central division proceedings should be stayed while the local division decides what to do. In fact, however, the Court in our mock proceedings decided to be more proactive and took control by exercising its case Dominic Adair, technical judge and registrar: management powers to join the actions together. This prevented the timetable in the proceedings as a whole from slip- In our case, the judge rapporteur had to make a lot of ping. Whether this would actually happen in practice is decisions about procedures. The rules do provide for a another matter, but it highlights the potential importance of review of case management decisions by the judge rap- the tactics used and the level of intervention by the Court on porteur, but it’s not clear how that will work in practice the overall timetable in the UPC. Tactical battles over forum and how it will affect things like demands for cross-ex- are highly likely; and highly likely also to cause delays unless, amination. as here, the Court takes a grip.

The most striking feature of the hearing itself was Another aspect of the UPC system is that each panel includes the cross-examination of expert witnesses. We took a judge rapporteur, who is responsible for the interim proce- the view that a technical judge may not be so famil- dure. Even in a division based in the UK, this does not have iar with the rules of evidence but would have a sci- to be a British national, and given that possibility, the appoint- entific knowledge and lead the questioning of the ment was handed to one of Bristows’ French-qualified asso- parties. The control of that was down to the presid- ciates, Vanessa Rieu. The first outing before “Judge” Rieu was ing judge. an application by the patentee under Rule 19. This rule appears aimed at challenges the jurisdiction of the Court, and Because of the limited time for the hearing, the parties hence was seemingly doomed to failure. However it was used had worked to prepare many different points but in the by the patentee to complain about the Registry having ac- end had to focus based on the direction of the presid- cepted (and served) the statement of revocation without all ing judge, so they did a lot more work than turned out the documents referred to. Hence, it was argued that the Reg- to be necessary. Therefore the costs might be quite a bit istry should not have accepted the claim, and the claim was higher than people anticipate. therefore not validly filed. The patentee responded to the effect that this was a misconceived application, having nothing Another surprise for me was that the life of the registry to do with the real purpose of Rule 19. The claimant con- is quite complicated. I played the role of registrar and cluded that this was a thinly disguised attempt to obtain early had to serve everything, even when I received an email evidence (and indeed that was exactly what it was) and that late at night. It will require quite a resource to do that the facts should be pleaded out before the costs of producing for hundreds of cases. the evidence are incurred.

Judge Rieu gave her decision (French-style) the day following the hearing, in writing. She dismissed the Rule 19 objection, because the Court clearly had jurisdiction and

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Left to right: Dominic Adair, Vanessa Rieu, Philip Westmacott, Edward Nodder and Alan Johnson

competence under Articles 32(1)(d) and 33(4) of the UPC Agreement, but allowed the application in substance. She noted that under Rule 172.2 also, the Court may at any time Timeline during the proceedings order a party making a statement of fact to produce evidence that lies in its control. Hence, she January to February 2014: Bristows partner Alan Johnson creates the required the patentee to produce the fact and expert evi- scenario: a case in the pharma sector, about existing European patents dence referred to in the initial statement of revocation and SPCs not opted out, where the defendants were alleged to be actively within six weeks and extended the defendant’s time for serv- promoting off-label use. This included common facts and documents for ice of its defence until six weeks after service of the evidence. both parties, as well as particular documents, facts and client instructions. She reasoned that the Rules should be construed in the light of the “overarching principles of ‘fairness and equity’ ex- March 2014: Two legal teams are recruited from the Bristows patent litiga- pressly stated in both the Preamble of the Rules of Proce- tion group (two partners and 3 associates per team). Other partners and asso- dure and the Agreement and which ‘shall be ensured by ciates would play the witnesses and the judges: two local judges, a judge having regard to the legitimate interests of all parties’”. She rapporteur and a technical judge. The patentee initiates pre-action correspon- clearly had little sympathy for the claimant’s argument that dence, threatening to bring proceedings in the London local division in May. under the UPC procedure it was envisaged that evidence would be submitted during the interim phase, rather than August 2014: First hearing. The defendant starts with a pre-emptive ap- the written phase. plication to revoke a patent in the London branch of the central division. The patentee makes a Rule 19.1(a) objection, which is a preliminary objec- The advocates for the claimants were not impressed by the tion to the jurisdiction and competence of the Court based on the fact that ruling: “She can’t do that” was muttered after the hearing. evidence wasn’t provided. Judge Rapporteur Vanessa Rieu gives her deci- The response from the defendants’ advocate was pithy: “Well sion the next day dismissing the objection but requiring the evidence to she just did!” be provided in six weeks.

The ruling demonstrates vividly the uncertainties of rules which October to 16 February 2015: The claimant served evidence, and modi- give judges, especially the judge rapporteur, a great deal of dis- fied its statement of case. The defendant filed its case and brought a sepa- cretion, but without any established background practice. rate action for infringement in the London local division. The judge When the new Rules of Court were introduced in the UK in rapporteur decided to join the cases, and after hearing objections, to allow 1999 implementing the Woolf reforms, it was the same judges the local division to hear the conjoined action. who applied the new rules, and the established procedural case law was cited. It was evolution rather than revolution. The UPC 23 April 2015: The interim conference. At the hearing the judge starts is different. Nothing has gone before except wholly different speaking French! The discussion is about additional evidence filing and national practices. Eyes of different nationalities will read the third party disclosure. As per the second case, the defendant decided it UPC rules in different ways. would rely on invalidity as well as non-infringement, counterclaiming for revocation. Judge Rieu referred to the full panel for decision and later on Whether or not in practice real UPC judges take the same declined the request to add the counterclaim. line as Judge Rieu is, of course, another matter, but her decision also demonstrates one of the potential dilemmas facing 28 July 2015: Oral procedure. The judges decided that they did not want litigants in the UPC. If they set out their evidence in full at the to hear any argument at all on some issues. Witnesses are called in and beginning of the written phase, they will front-load their costs, the parties have a chance to expose their arguments. reveal their case more fully than they may wish, and the costs may be incurred unnecessarily if they relate to matters which September 2015: Decision expected. are admitted or if the case settles. However, if they do not

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plead their case fully, the Court may order “early” production Alan Johnson, puppet master of proceedings: of evidence, leaving them with a tight deadline to produce the evidence; or the Court might not permit the evidence to be I planned out the scenario so that difficulties of a practical adduced during the interim procedure. The usual practice nature would arise. Witnesses were briefed to be uncoop- may well turn out to be: put everything in or else it may be erative, change their minds subtly about the evidence they excluded. could give, or whether they would give it at all. New facts came to the attention of the parties as the case progressed. Later in the proceedings there were further disputes about This meant that the parties were forced to depart from the admission of evidence late on which further illustrate the originally pleaded position and adduce evidence late. This problem. is turn forced the Court to consider whether new (late) evidence should be admitted. In two cases, admission of the What then of the final oral hearing itself? Two particular evidence had to be decided at the oral hearing. features were most notable. First, the parties had to prepare for a whole range of issues, but were only called upon to address the court on certain of them. The judges decided that they did not want to hear any argument at all on some issues. The second feature was that the work was split be- Edward Nodder, legal judge: tween a number of advocates dealing with different issues. This was no one-man show, but a real team effort on both We had not been much involved in the preparation of sides. In this case it may have been exacerbated by the case the case for trial – that had mostly been in Vanessa’s do- having been run in parallel to real work for real clients, but main as judge rapporteur. When it came to trial, we in a procedure where so much has to be crammed into a looked at everything on the merits afresh in the light of short timetable, it seemed easier to both sides to allow the the UPC rules and the previous orders Vanessa had case to be divided up by issues. made. The judges did their own reading and only got together a day or two before the oral hearing. There were many more points emerging from the exercise. To give some examples: We were all astonished by just how much we learned • Due to the role of the Registry, there was no inter partes cor- from this exercise. Reading the rules is one thing, but respondence. using them is completely different. • The rules on the interim conference have an apparent la- cuna. There is a process (which is not an appeal) which In one respect evidence had been submitted late, but a allows the parties to request the full panel to review any few weeks before the hearing. This was before the interim decision by the Judge Rapporteur made at the interim procedure had closed, so we let it in, but allowed cross-ex- conference, but no clarity at all as to how it is supposed amination. But in another respect, what was offered was a to work witness being produced to give fresh oral evidence on the • The judges found the plethora of pleadings which the UPC day of trial. It could have been critical evidence because it allows confusing and repetitive. Hence they found the par- related to what was disclosed orally at a conference. You ties’ summaries prepared for the oral hearing very useful. might get away with such an ambush at trial in English patent proceedings, but we decided that this wasn’t fair But overwhelmingly it is the importance of the role of the on the other party given the extensive exchange of brief- judge rapporteur that comes most clearly out of this process. ing style pleadings which had gone before. We were more He or she has so much discretion in case management powers concerned about the effects of allowing evidence in late that different approaches of individual judges may have pro- than looking at the reasons why it was late. found implications for the course of the proceedings. Since presumably the judge rapporteur duties will be shared out be- One question we had to consider was: What should a UPC tween all judges in any one division, this will make trying to judgment look like? How much analysis should there be? predict behaviours of individual divisions in individual cases I expect the Court of Appeal will be very busy considering even more difficult: for example, were Mr Justice Carr to be whether early UPC judgments are correct and that will be deputed to be the visiting judge in the possible difficult if there are very different styles of judgment. Slovenian/Hungarian/Croatian regional division, litigants filing there with an expectation of a non-English approach could As someone steeped in the English tradition, the UPC be more than a little surprised in cases where he performed feels like rougher justice. It is less thorough at trial and the judge rapporteur role. In case we did not know it already, we excluded some evidence that was late – that proba- the Bristows’ mock action shows that the UPC will be full of bly wouldn’t happen in an English court. The parties’ surprises. The unexpected must be expected. lawyers learned that you need to do more earlier: the proceedings are heavily front-loaded. As an attacking party, you can get a big advantage by doing early © Bristows 2015. Alan Johnson is a partner and preparation and then rushing the defendant. coordinated the mock proceedings. The other people mentioned are either partners or associates of the firm Alan Johnson

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A day in the life of a patent examiner

Gillian Thompson of IP Australia speaks to Managing IP about what her work is like, some of the most interesting inventions that have come across her desk and why she is optimistic about the future of innovation in Australia

Tell me a bit about your background. AUSTRALIA At school I studied science subjects including physics, chem- CONTENTS istry and maths. I then went onto study mechanical engineering at Reading University in the UK. After graduation I initially 80 | Q&A: litigation update. worked in the motor trade for a Land Rover/Jaguar/Aston Blair Beven and Joe Martin dealership. I then worked for a privately owned engi- Seisdedos of AJ Park neering company that manufactured perforated products for various businesses, such as light fittings, speaker grilles, down- 85 | A unique slant on a unique hole oil and gas drilling products. system. Wayne Slater and Daniel Rosenthal of IP In 2010 I took up an opportunity to immigrate and work for IP Gateway Australia. I went through our extensive patent examiner training 90 | Innovation patents program and joined one of the two mechanical engineering sec- under scrutiny. Matthew Ward tions, covering technologies such as mining and construction. of Shelston IP 99 | A red flag for IP holders. After a couple of years in this section, I moved to our other me- Aminiasi Vulaono and chanical engineering section which covers applications for in- Artika Prasad of Pacific Islands novations such as gearboxes, vehicles, marine vessels, Intellectual Property Services aeroplanes and household and garden appliances – so a wide range of diverse technologies. I am currently examining an application for a washing machine!

One of the great things about working at IP Australia is that it provides opportunities for me to apply my mechanical engineering qualifications, plus I can build on those qualifications through the extensive training and professional development opportunities offered by the agency.

I’ve been lucky enough to be involved in a number of projects over the years outside of examining patent applications. For ex-

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Within my mechanical engineering section, we examine a hugely diverse range of technologies – from garden appliances to internal combustion engines. Generally each examiner has their favoured area of expertise, perhaps a technology they’ve previously worked in or they’ve examined a large number of applications in. I particularly enjoy examining vehicle-related cases.

Our office is situated within walking distance of a shopping centre with an extensive array of shops and cafes, so on my office-based days I’ll usually meet my husband there for lunch. I also try to have breaks and move around during the day to stretch my legs! We have a break out area on our floor where we can get together, which is great as it allows for discussion and social interaction.

We have a culturally diverse staff as people from all over the world work at IP Australia. This makes for some great chats over coffee where we discuss anything from a challenging case we may currently be working on to differences in cultural background. I find it fascinating to learn about so many different cul- tures and heritages.

Our working week is 38 hours and we’re lucky enough to have access to flexible work hours, which means to a certain extent I can change the hours I work to accommodate a personal ap- pointment or commitment I might have. ample I’ve assisted in new examiner recruitment and helped to set up the IP Australia Women’s Network within the organisation. While patent examination can be varied and interesting in as What are the most challenging and much as no two cases seem to be alike, it’s also great to be involved rewarding parts of your job? in non-patent exam projects as it’s a good opportunity to see how other sections of the business function and to meet new people. The most challenging part of my job is ensuring that I keep up to speed with new technology advances across the wide and diverse range that we examine. We cover so many different tech- What does your typical day look like? nologies week to week. One day I may be examining a coffee machine and the next day a gearbox, so it is really important to A typical day for me starts early, usually around 7:30 if I’m in keep up with developments. the office and 7:00 if I’m home-based, as I work two days a week from home. Home-based working is great and quite different The job is also very rewarding as I am involved in and review in- from working in the office. I tend to structure my work in such novative ideas and inventions before they reach the commercial- a way that I spend my home-based days mostly searching, read- isation stage, a bit like having a snap shot into the future! Given ing citations and writing reports whereas on my office-based the large amount of applications we examine as a section it gives days I have more interaction with the rest of the section. This great confidence that entrepreneurship and innovation is alive includes regular section meetings where we discuss everything and well and it’s satisfying to be supporting that in Australia. from updates to our Patents Manual of Practice and Procedure to new systems such as Global Dossier. I have examined a broad range of cases including renewable energy technologies, personal protection, and fall protection I also organise IP Australia’s new examiner mentoring scheme- we equipment for people working on roofs and in other elevated call it the Buddy Scheme, where I’ll arrange for an existing examiner locations. One interesting case I examined was a wetsuit that to “buddy up” with a new recruit to offer support and advice. I also aims to protect divers from sharks which in turn, you’d hope, organise my three-person search teams for my office-based days. could reduce the sharks culled as a result of attacks. These meetings involve two other examiners where we spend time drafting a search strategy for original search cases we are working on. We also have a number of out-posted workers as part of my sec- What is the one thing that most tion, who are based all over Australia. We use teleconferencing to applicants don’t know or don’t keep in touch with them, so a three-person team could well be me understand about your job? and a colleague in our Canberra office along with a third colleague in Adelaide. These teams are very useful to discuss how I’ll search My thoughts on this relate predominantly to private applicants the application, any formality issues that may be present in the spec- in that possibly the most important thing when filing is to en- ification and we also share ideas about the application. sure that you include ALL the subject matter of the invention,

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Total patent applications at Total patent applications to IP Australia IP Australia for IPC Code F

Direct applications PCT applications Total applications (Mechanical engineering; lighting; heating; weapons; blasting)

30,000 2,000

25,000 1,500 20,000

15,000 1,000

10,000 500 5,000

0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

as once the application is filed the information in that applica- I think it’s important that they are not put off from calling the tion has a particular filing date. As examiners, we examine the examiner if they need to. Don’t be afraid to give us a ring. case and often speak with the applicant and it usually comes to Once we issue a report and the applicant receives it, it can light that a particular aspect of the invention wasn’t detailed at be a very daunting document. It would be great if the appli- first filing and the applicant wants to add it in – but that feature cant called us promptly after receipt of this report if they have then cannot claim that same original filing date. any queries rather than waiting until very close to the deadline date. Our website is a wealth of useful info for applicants; we provide information to help private applicants and small businesses through the whole patent examination process. This is to sup- What legal developments are you port and promote small business innovation and give them keeping track of? confidence in the IP system and how it can help them. The future of the innovation patent system in Australia is an Furthermore, I think it is really important that private applicants issue of interest following its review, released in mid-2014, by appreciate the vast extent of the prior art base. They need to do the Advisory Council on Intellectual Property. The innovation thorough searching before filing- use Google, use AUSPAT (IP system was introduced to replace the petty patent system fol- Australia’s online patent database with records dating back to lowing an Advisory Council on Intellectual Property review in 1904 and accessible through our website) and get a feel for 2001. The Innovation system has a lower inventive threshold what’s already out there. than that required for a standard patent and offers quick and in- expensive protection. Also, we offer an eServices system, where applicants can file documents and payments with us electronically and we send The growth of the Global Patent Prosecution Highway out all correspondence to them electronically- this also helps (GPPH) is also of interest. This allows Australian innovators our quest to be a paperless office. The great thing about it is that to fast track their applications in a total of 16 participating IP it’s much quicker than the post. 97% of our customers now sub- offices around the world, and also applicants from any of mit their applications through our eServices portal. those sixteen other countries to request accelerated examination in Australia. One of the great things about the GPPH is that it assists us in strengthening international cooperation Do you have any tips to applicants between overseas offices and ensures maximum work-shar- who are filing patents at IP Australia? ing potential. Since its inception in January 2014 applicants using the GPPH in Australia have used it most heavily to ac- Again I’m thinking of private applicants here rather than celerate examination in the US, followed by Canada, Japan those represented by a member of the IP attorney profession. and the United Kingdom.

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Q&A: litigation update

Blair Beven and Joe Seisdedos of AJ Park report on recent developments on the Australian IP scene, including a crackdown on piracy and copyright theft

How does Australia compare to the rest of the world when dealing with enforcement of IP rights? It appears to be a litigious market – is this the case? If so, why? How effective are dispute resolution measures in resolving matters outside of the courtroom?

Australia is not a particularly litigious market in that IP cases represent only a small percentage of all cases started. However, the majority of IP infringement cases that are started have merit. Australians are very protective of their rights and are eager to use the court system to resolve disputes.

In Australia, the relevant legislation prohibits the making of unjustified threats of legal proceedings in relation to copyright, patent, trade mark and design infringement. This means that potential applicants are normally satisfied they can prove the rights claimed before sending the initial cease and desist letter.

According to a recent survey on litigation trends (Norton Rose Fullbright Annual Litigation Trends Survey, 2015), 25% of all respondents believed that the number of disputes or proceedings would increase in the next 12 months. If this trend is true, then companies face significant challenges ahead with higher regulatory oversight and investigations, higher litigation budgets, as well as the focus of the business being distracted. The same survey indicates that outside the IP space, class actions in Australia have increased in the last 12 months.

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Blair Beven Joe Seisdedos

Blair Beven heads AJ Park’s trade mark practice in Syd- Joe Seisdedos heads AJ Park’s patent practice in Syd- ney. Blair has over 15 years’ experience advising ney. He has over 13 years’ experience in intellectual clients on the creation, protection, licensing and en- property, with a particular focus on the Australian, US forcement of intellectual property in Australia, New and European markets. Zealand and around the world. He regularly attends the Federal Court of Australia in defence of clients’ Joe has extensive experience in drafting and prosecut- rights. ing patents and specialises in information technology, business methods and medical technologies. He has a Blair’s clients include actors, leading fashion design- background in nuclear physics, detector development ers, top models, production companies and execu- and complex system simulation. tives in the entertainment industries. He also works to assist clients in capitalising on their name, fame, He has also taken a key role in a number of patent liti- likeness and other rights in all media. He negotiates gation and opposition cases and has provided patent and structures profitable merchandising, licensing infringement and litigation advice to a number of IT, and endorsement agreements and counsels clients electrical and medical device clients. Joe lectures at on the development of their own celebrity-branded two Australian universities on intellectual property product lines. and the drafting of patent specifications.

The Federal Court of Australia (FCA) is committed to resolv- Two other changes in the trade mark area also occurred in 2013. ing disputes quickly, inexpensively and efficiently. The Court Additional damages for trade mark infringement were intro- has the power to order parties to mediation, arbitration or other duced, as were substantial changes to practice and procedure forms of alternative dispute resolution. Even where not ordered, before the Trade Marks Office. Both changes have lead many the Court will sometimes strongly recommend alternative dis- practitioners to speculate that appeals from the Trade Marks pute resolution. It is interesting to note that of approximately Office will increase. As new trade mark cases are commenced 102 IP-related cases started between June and December 2013 and reach final decisions, it will be possible to guage the impact in the FCA or Federal Circuit Court (FCC), only 18 were still of these changes. open in February 2014.

What are the main differences What are some key developments between Australia and other in Australian IP legislation that have countries’ IP litigation procedures? had an impact on litigation? Although most jurisdictions have similar practices and proce- The FCA has introduced a fast track system for IP cases, other dures, in Australia, when commencing proceedings in the FCA than patents. There are no pleadings in such matters. A sched- or FCC, an applicant must file a Statement of Genuine Steps. uling conference with legal representatives occurs within six This Statement sets out what steps the applicant has taken to re- weeks of the proceedings being started with an expected hearing date of two to five months after that. Judgments are issued within six weeks of the hearing. Companies face significant challenges Since 2013, the FCC – which was established in 1999 to pro- ahead with higher regulatory oversight vide a simple and accessible alternative to FCA proceedings – has jurisdiction to hear trade mark and design related matters. and investigations, and higher Although the rules and procedures are generally the same as those in the FCA, the initial filing fees are lower; and, as judges litigation budgets with specialised IP knowledge are appointed, it is anticipated that more litigants will take this option.

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ice provider (CSP). There is now a requirement for CSPs to take reasonable steps to disable access to the online location (where that online location is outside Australia), where the on- The Federal Court of Australia is line access’ primary purpose is to infringe or facilitate the infringement of copyright, regardless of where the infringement committed to resolving disputes occurs.

quickly, inexpensively and efficiently Debate surrounding the introduction of the new section has centred largely on the film, television and music industries. However, the changes apply equally to software (including games), photographs, and other copyright-protected works.

solve the dispute and if no steps were taken, an explanation of The FCA recently made orders requiring six internet service why not. For example, an urgent injunctive relief may have been providers (ISPs) to provide preliminary discovery of the names required. Failure to show reasonable attempts to resolve the dis- and physical addresses of account holders associated with 4,726 pute may have cost consequences later in the proceedings. particular IP addresses. In Dallas Buyers Club v iiNet 2015 FCA 317, the applicants claimed that they had identified account holders who had infringed the copyright in their film, Dallas Australian damages appear high. Is Buyers Club, by sharing the film online using BitTorrent, a peer- this the norm and does it help to-peer file sharing network. The applicants sought discovery prevent further infringement? of the identity of each of those account holders from the ISPs, on the basis that those account holders might either be infring- Many Australian practitioners would think that damages awards ing the applicants’ copyright using BitTorrent, or may be able in Australia are low when compared to other jurisdictions such to help the applicants in identifying the actual infringers. as the United States. Applicants often have difficulty in proving actual damage especially when they have not as yet begun to This decision is the first of this magnitude in Australia and sug- sell their goods into the market and cannot prove loss of sales gests that the courts will afford little tolerance to online in- or reputation. fringers. The case may well act as a deterrent to potential online infringers who might have previously formed a view that pri- The awarding of additional damages has helped applicants re- vacy obligations would protect their identity. The courts have coup some losses as the quantum of proven actual damage is however, acknowledged the need to balance the rights of rights not relevant to the quantum of additional damages. In Aristocrat holders and the privacy of individuals. Technologies Australia v DAP Services2007, for example, an award of A$40,000 ($29,000) additional damages for copyright infringement was increased to A$200,000 on appeal. In the more Should Australian brand owners be recent copyright infringement case of Vertical Leisure v Skyrunner worried about trade mark 2014 A$44,800 was considered appropriate as damages for loss squatting? of profit, A$50,000 for loss of reputation and A$300,000 by way of additional damages. All brand owners need to be aware of the possibility of trade mark squatting. With the introduction of the new gTLDs It is also important to note that the hearing for damages is sep- (generic top-level domains), there are even more domain arate to the infringement or validity hearing. In most cases, once names available that pose potential risks. It is important that the FCA has delivered a judgment on infringement and validity, brand owners obtain registrations for their trade marks in the parties will come to their own private arrangement on the Australia so that they can either bring an action for trade mark appropriate damages award. It is rare to have a hearing on the infringement or make a complaint to au. Domain Administra- quantum of damages, so there is very little case law to provide tion (auDA) – the industry self-regulatory body for the .au do- feedback on what the FCA would in fact award if asked to rule main space. Complaints to auDA are a simple and cost effective on the question of damages. way of having the infringing domain name taken down. How- ever, if an organisation wants the domain name transferred, a formal complaint needs to be made. Australia has been cracking down on piracy and copyright theft. What has been implemented, and what Any comment on plain packaging effect will this have on digital litigation cases? piracy, ISPs, the media and entertainment industries ? Australia is still waiting on the outcome of various actions taken before the World Trade Organisation concerning the le- On June 27 2015, the Copyright Amendment (Online In- gality of Australia’s plain packaging laws. Five countries have fringement) Act 2015 came into effect. This Act introduces a challenged the laws; however, in June 2015, the Ukraine sus- new section 115A into the Copyright Act 1968 (Cth) allowing pended its proceedings hoping to find a mutually acceptable copyright owners to obtain injunctions against a carriage serv- agreement. The plain packaging laws have been in place since

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an effort to stop an individual, Luke Edwards, from registering his kangaroo silhouette device (left) in class 25 for clothing. The market for providing IP registration Qantas based its opposition on a number of flying kangaroo marks including this one (right), registered for merchandising services to multinationals has been services. Qantas did not succeed on any of the opposition heavily impacted by regulation in grounds. The proceedings were heard in March 2015 and a decision is pending. recent years Crown Resorts, owned by James Packer, has commenced proceedings against Crown Group Holdings and 34 other companies in that group to stop use of Crown. Iwan Sunito is a property developer and wants his companies to use the December 1 2012 with various cancer organisations pointing Crown brand for their luxury apartments. The applicants to studies that show plain packaging is working. claim the respondents are trading off the Crown Resorts’ reputation in their casinos and hospitality services. The two parties are also involved in opposition proceedings before What cases should we watch for the Trade Marks Office over the use of Crown. This case developments in the trade marks will join a number of recent decisions concerning the use space? of a trade mark in relation to buildings where Cairns Har- bour Lights was considered descriptive, while Harbour In May 2015, Moroccanoil Israel commenced trade mark in- Lights was not. fringement proceedings against Aldi Foods. The two companies have already been involved in proceedings in the United Kingdom, where Moroccanoil was unsuccessful in establishing Do you have any other observations that Aldi’s sale of its Miracle Oil hair product amounted to ac- about the IP landscape in Australia? tionable passing off. Although it is unclear from the court documents whether the trade marks involved are the same, the We opened our Sydney office in 2013, and our work in the information to hand points in the affirmative. last 12 months has seen a real focus on dispute resolution. We have seen quite significant shifts in the IP landscape in Aus- In Australia, Morroccanoil has tralia, driven largely by legislative changes that will lead to fur- trade mark registrations for its ther harmonisation of the profession across Australia and Moroccanoil M device labels. New Zealand.

In addition, Aldi is opposing We’re also seeing a consolidation of firms and investment in pe- Moroccanoil’s application for the word mark Morrocanoil. The ripheral companies (such as patent analytic software compa- parties appear to have failed at settling their differences at media- nies) brought about by the ability of Australian firms to raise tion in July 2015 so the matter will now proceed towards a hearing. capital through listing.

In light of the recent decision in Verrocchi v Direct Chemist Outlet The market for providing IP registration services to multina- 2015 concerning the validity of the trade mark Is This Aus- tionals has been heavily impacted by regulation in recent years. tralia’s Cheapest Chemist, and the get-up of chemist’s stores, a Accession to the Madrid Protocol, as well as the upcoming sin- decision concerning the Aldi product similarity to that of Mo- gle desk for filing patent applications, along with the potential roccanoil will be very interesting. for an e-PCT are all driving the consolidation of international work into a smaller number of firms. Australians love David versus Goliath fights. In the follow- It is not all pessimism though. Those firms with a good base ing example, Qantas Airways of local clients are somewhat insulated from these interna- has appealed a decision of tional changes, and in fact can benefit from them in some the registrar of trade marks in respects.

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A unique slant on a unique system

Wayne Slater and Daniel Rosenthal of IP Gateway offer advice on how to get the most out of filing design applications in Australia

ustralia acquired a new Designs Law in 2003 that made substantial changes to the previous Designs Law of 1905. As the 1905 law stretched back to the Victorian age in England, there was clearly an urgent Aneed for designs reform in Australia. However, since the 2003 Designs Act came into force on June 1 2004, there has been relatively little case law. This has limited the development and understanding of the new law.

With the Apple v Samsunglitigation before the Australian Federal Court in 2014, there was hope that this was about to change. However, the matter settled confidentially without generating the much-awaited case law to guide practitioners in Australia.

Rather than discussing the published practice of the Australian Designs Office as expressed in the examiner’s manual, which is of limited value, we think it best to go back to basics. This article will therefore look at the statute and consider options and strategies for the preparation of design applications in Australia.

In the absence of developed case law, the efficacy of designs protection in Australia depends on the level of creative and strategic thinking of the attorney preparing the application.

The product

According to the Designs Act 2003, ‘a design, in relation to a product, means the overall appearance of the product resulting from one or more visual features of the product’.

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In other jurisdictions, parts of products can be protected. Such designs are generally entitled ‘portion/part of a product’, with the part for which protection is sought shown in solid lines and a disclaimed portion shown in dotted lines. There are examples of similarly identified parts of products on the Australian De- signs Register. This creates an inherent inconsistency, as a part of a product is generally not a product under the 2003 Act. How Wayne Slater a court will consider this inconsistency has not yet been tested. However, in a relevant decision by the Australian Designs Of- Wayne Slater is a registered patent attorney with over fice it was held that identifying the product as a part of a product 28 years’ experience in the preparation and prosecu- is not, of itself, a ground for revocation, but that the product tion of patent and design applications around the should properly be regarded as the whole product shown in the world. He started his IP career at Adams & Adams in representations. South Africa in 1988 and he emigrated to Australia in 1991. He advises clients all over the world in relation It is therefore important that overseas applicants understand to designs protection with a particular emphasis on that the scope of protection provided under Australian de- the countries of Asia in particular south east Asia and signs law may be quite different to that under their own Australia. countries’ laws.

Wayne has authored several published articles on Aus- An exception to part protection is where the part in question is tralia and international designs law. In addition, he is a separately made component part of a complex product. A a long-standing member of the INTA designs commit- complex product is ‘a product comprising at least two replace- tee, a member of the AIPPI Standing Committee on able component parts permitting disassembly and re-assembly Designs and has given talks and presentations on de- of the product. signs and patent law all over the world. Wayne also attended the inaugural INTA meeting of designs Therefore, for example, on a hammer where the handle and the practitioners in Copenhagen in 2012. head are mutually detachable to allow disassembly, the handle and the head may each be considered products in their own right, and a design for either is potentially registrable.

Conversely, on a hammer which does not permit disassembly into two or more component parts, neither the handle nor the head is considered a product, and the product named in a design application should be the hammer (as a whole).

However, it appears logical where a component part of a prod- The Designs Act 2003 further defines a product as ‘a thing that uct is supplied and sold, independently, by a different manufac- is manufactured or hand made’. Certain ‘things’ are not consid- turer, that the component part is a product, even if it is ered to be products under the Act: a thing that does not have a sometimes incorporated into a larger product that is not capa- physical existence on its own will be unlikely to be a product. ble of disassembly. Therefore, whether an article is a product or For example, a font has been held not to be a product since it not may depend on the commercial arrangements under which cannot of itself be manufactured, but rather is something ac- the article is manufactured and sold. These arrangements may cording to which products, such as typefaces, can be made. not be determined when an application is filed, and may vary over time, making assessment of whether an article is a product It is important to note that under the 2003 Act, a design must potentially very subjective. be ‘in relation to a product’ rather than merely a part of a product. Although a part may be emphasised by use of a statement Therefore, careful consideration of how to direct an application of newness and distinctiveness, there is no provision in the 2003 for design protection is especially warranted where there is po- Act for fully disclaiming the rest of the product. tential to protect a design for more than one of: an entire article; a separately made component part of the article; and, an emphasised part of an article or component part. In some cases, the best approach may be to file a separate application to cover each option. The efficacy of designs protection depends on the level of creative and Statement of newness and strategic thinking of the attorney distinctiveness Australian law provides the option of including a statement of preparing the application newness and distinctiveness (SOND) in which the applicant can identify some visual features of the design as new and

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distinctive. These identified features are then given particular regard when comparing the design to other designs (for the assessment of both registrability and infringement).

The SOND is sometimes used in an attempt to disclaim features by stating that they are not part of the design. In many cases, this can result in an attempt to define a design which does not relate to the overall appearance of the product, thereby cre- Daniel Rosenthal ating tension between the SOND and the requirements of the Designs Act. Daniel is a longstanding fellow of the Australian Institute of Patent Attorneys and also a UK patent There is no judicial guidance on how this tension may be re- attorney. solved. At best, the inconsistent part may be disregarded and the SOND regarded as directing emphasis to the newness and Originally from London, Daniel graduated in physics distinctiveness of the features identified as such. At worst, there and worked for the publishing arm of the British Insti- could be an argument for invalidity on the grounds that the reg- tute of Physics before making the move to IP. In 1993 istration does not actually relate to a design as defined under he completed a master’s degree in the management Australian law. of intellectual property at the University of London, and joined a major British patent attorney firm, quali- We therefore advise that statements to the effect that certain fying as a UK and European patent attorney by the end features of a product ‘do not form part of the design’ should gen- of 1997. He migrated to Brisbane in 2001, joined a erally be avoided. major Australian patent firm, and registered as an Aus- tralian patent attorney in 2003. He joined IP Gateway Importantly, a SOND cannot be amended after registration. in 2013. This would be very concerning if a court made a harsh judgment on this issue. Daniel has a great enthusiasm for patent and designs protection, and takes pride in delivering high-quality work and creative IP solutions, such as finding ways to Representations provide protection for innovations which might initially appear difficult or impossible to protect Australian design law is fairly flexible without strict require- effectively. ments regarding presentation of the representations. Represen- tations prepared in accordance with the laws of countries with very different drawing requirements can be filed in Australia.

Representations may therefore be prepared on a case-specific basis so as to best illustrate the key visual features for which pro- being considered distinctive over an earlier design having tection is sought. It is important that the whole product is illus- similar significant features. trated and not merely a part of it. The scope, for registrability and infringement, of Australian design registrations with representations using dotted lines may therefore Dotted lines be quite different that of overseas registrations, even those using identical representations. Applicants should be aware of this im- It is established practice in other jurisdictions, and in particular portant difference when filing design applications in Australia. the US, to use combinations of solid and dotted lines to respectively claim and disclaim parts of a design. In other jurisdictions, dotted lines are impermissible. There is no express law in Aus- Filing strategies to optimise design tralia regarding dotted lines. protection

In practice, dotted lines are used to deemphasise features to- One option to optimise design protection is to file a first appli- gether with a customised SOND stating that newness and dis- cation showing the whole design in solid lines without empha- tinctiveness reside in the visual features shown in solid lines. sising any particular part, and a second application in which one or more specific features or portions of the first design is em- However, the Australian Designs Office has considered that a phasised by using dotted lines and a customised SOND to SOND does not derogate from the need to assess distinctive- deemphasise the other features. ness of the design in the context of the overall impression of the product bearing the design. For example, if a visual feature This may be considered as directing the first, relatively narrow, is considered by an informed user to be insignificant in the application to protection of the overall appearance of the com- overall impression of the product, a design registration show- mercial product, and using the second application to provide ing that insignificant feature in solid lines with the remaining potentially broader protection more focussed on the specific significant features in dotted lines may result in that design not emphasised features.

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Australian system, including freedom to protect entirely functional designs, low filing cost, and (normally) indefinite deferral of substantive examination, if desired. The assessment of whether an article is Despite the frustrations of a continuing lack of instructive case law, Australian designs law remains an exciting area that can re- a product is potentially very subjective ward creative filing strategies.

Potential changes to Australian design law

ACIP (Australia’s Advisory Council on Intellectual Property) Alternatively, multiple design applications may be filed, each has handed down its final report on designs protection in emphasising a different part of the product by varying the dis- Australia. tribution of solid and dotted lines. One year ago, we reported on uncertainties in design protection It is also possible to file several designs protecting similar but for GUIs (graphical user interfaces) in Australia. While designs different designs. This might be called the cover the field ap- for GUIs were generally processed through to registration, the proach. Similar but different designs are registered to effectively enforceability of these designs was less certain. There are fun- monopolise an area greater than a single design on its own. This damental difficulties for GUIs being considered products in can make it difficult for a designer to enter the space without a Australian law. In our view, this was a serious shortcoming of risk of infringement. Australian designs law in the modern era. ACIP has recommended that the protection of image-based non-physical de- This strategy is aided in Australia by the ability to protect even signs should be reconsidered. However, it also noted that entirely functional designs and by the fact that designs can be changes would require major amendments to the Australian filed inexpensively in Australia with examination deferrable in- Designs Act. Accordingly, these changes cannot realistically be definitely. expected to occur for at least a year or two.

Australian designs law is unique, offering many opportunities While multiple designs can be filed in a single application, the for well-advised applicants who take the time and the trouble cost is no less than that of a corresponding number of separate to extract the maximum benefit from their designs filings. applications. ACIP has recommended the official fees for designs included in multiple designs applications be reduced. This The key to effective protection undoubtedly lies in the prepa- would undoubtedly be a positive step forward for Australian ration of the application. Well thought out and well-structured designs law. filing strategies will achieve superior outcomes often for little or no additional cost. ACIP has also recommended that a six-month grace period be introduced. Australian designs have never had a grace period, The opportunities for an applicant to manoeuvre and amend despite Australian patent applicants enjoying a 12-month grace an application are very limited after an application is filed and period. We believe that a 6-month grace period would be a pos- even more limited after an application is registered, reinforcing itive development in Australian designs law. the need for well thought out applications prior to filing. Australian designs law does not provide for third parties to op- The Australian system registers designs without examination pose registration or certification of a design. This is a severe lim- and effectively permits examination to be deferred indefinitely. itation to the system, as the only avenue for a third party to Consequently the system is not expensive and this enables an challenge the validity of a design before the Designs Office is applicant to file multiple design applications to effectively pro- to file an ex-parte application for re-examination. The option tect the target product. of challenging validity before the courts is very expensive.

Because Australian designs law is unique, knowledge of designs ACIP has recommended the introduction of a system for op- law in other countries may provide little insight into the nuances posing certified designs to provide a low-cost forum for an ad- and tricks of filing design applications in Australia. versarial dispute regarding validity of a design registration.

Accordingly, it is crucial to seek advice from a specialised de- The exclusion of protection of partial products is something signs practitioner in Australia. that we as practitioners have agonised over during the last 10 years. ACIP has recommended that further investigation into The key take-home is that Australian designs law is quite differ- the protection of partial products be undertaken. Unfortunately, ent to that in other jurisdictions, but that despite certain appar- there is presently nothing definitive planned in this area. ent limitations commercially useful protection can generally be obtained with careful consideration of strategy prior to filing. We look forward to providing an update on progress made in Further, there are some specific benefits, to applicants, of the implementing the ACIP recommendations next year.

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Innovation patents under scrutiny

Matthew Ward of Shelston IP answers questions on the key developments of Australian patent law, including elucidation of the failings of the Innovation Patent Regime

What have been some of the more interesting recent developments in Australian patent law?

Right now, all eyes are on Australia’s innovation patent regime. For a long time, there has been a view that the regime is perhaps a little too good to be true. With a recent report from the Aus- tralian Council on Intellectual Property (ACIP) making a recommendation that the regime be abolished, it seems inevitable that there will be some significant changes. From a case law perspective, the Australian courts have had an opportunity to direct their attentions to issues relating to the bounds of patentable subject matter, including the software space.

What are innovation patents?

Innovation patents are unique to Australia: they basically provide a short-term patent (limited to eight years, as opposed to 20 years) with a reduced threshold for validity (in essence there is no inventiveness requirement). Unlike utility models in some other jurisdictions, there are no special restrictions on the sorts of subject matter that can be protected. However, there is a limit of five claims, which often causes applicants to pursue multiple innovation patents in parallel.

There are a few procedural differences between the innovation patent regime and the normal regime. The main point of differentiation is that innovation patents are granted without any substantive examination. However, that is only a formality grant, and before it is possible to assert rights it is necessary to go

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through a substantive examination process referred to as certification. That certification process can be commenced at any time (or not at all), and there is a mechanism for a third party to trigger the process (for example where there is a desire to obtain added certainty over scope). The rights conferred upon certification are substantially indistinguishable from standard patents in the context of enforcement. Matthew Ward Whilst the ability to refrain from substantive examination can be useful in deferring costs, we find that in most cases applicants Matthew Ward practises in the field of electrical and wish to have innovation patents examined right away, as the information technology related patents. He is a regis- regime is being used to address a near-term commercial objec- tered patent attorney, and has been admitted as a tive. It is fairly typical to progress from filing to certification in legal practitioner before the Supreme Court of New six months or less. South Wales, Australia.

Other points of differentiation include: an extended window Matthew specialises in the drafting and prosecution of to commence opposition proceedings before the patent office patent applications, and the provision of IP-focused (any time after certification); annual maintenance fees from the strategic advice to assist in the commercialisation of second anniversary; and, a few subtle nuances that become im- various technologies, with a particular focus on com- portant where an innovation patent is used in lieu of a provi- puter-related technologies. Whilst his clients include a sional application or initial complete filing. range of well established international businesses, Matthew enjoys the challenge of working with early stage start-ups, especially with those seeking to com- Why is the Innovation Patent mercialise smartphone apps, web-delivered technolo- Regime under scrutiny? gies, and consumer electronic devices.

The scrutiny has, in part, come about because of a perceived gap Matthew has drafted patent applications across a wide between: (i) how the regime was intended to be used; and (ii) range of technologies, including information manage- how it is being used in reality. Basically, the regime set out to pro- ment systems, computational analysis, eCommerce vide some low-cost options to help sole inventors and small and technologies, access control systems, building au- medium enterprises (SMEs) to obtain patent rights. The inten- tomation, telecommunications, optoelectronics, video tion was to stimulate innovation at that end of the market, to make processing and analysis, business methods, database it cheaper and easier to obtain patents for lower level inventions. systems, software, and gaming. With pretty strong anecdotal evidence of the regime being used other than as initially intended, the Australian Government’s Ad- Matthew has also spent time studying patent law in visory Council on Intellectual Property (ACIP) commenced a the US, perceived by many of his clients to be the most review into the regime back in 2011, and the final conclusions important market for their technology. were released this year in May. ACIP was quite direct: it has recommended that the Government consider abolishing the Inno- vation Patent Regime (citing economic justifications).

So, if the Innovation Patent Regime certainly more closely aligned with the US approach than that hasn’t been used as intended, how of Europe) often allows for some fairly directed claiming and, has it been used? with the low threshold for validity, that can result in strategically manufactured rights which are especially robust in the face of The Regime provides an incredibly useful strategic tool. The third party validity challenges. timeframe from filing to finalisation of rights is often less than six months, and without a need for traditional inventiveness, Accordingly, contrary to the intended purpose of stimulating the rights are especially difficult to challenge. Accordingly, when innovation within the SME sector, innovation patents have be- it comes to enforcement, innovation patents tend to be the come the weapon of choice for patent enforcement by sophis- weapon of choice for many businesses. In hindsight, the effect ticated players. was perhaps somewhat understandable; the Innovation Patent Regime provides opportunities to obtain extraordinarily robust rights on an expedited basis. Are there any known timeframes for change in the Innovation Patent A common strategy is to pursue a standard 20-year patent, and Regime? then at some stage during the application process, when a strategic imperative surfaces, obtain one or a handful of innovation At this stage, nothing is set in stone. Given ACIP’s scathing patents specifically directed towards a competitor’s activities. review of the Regime, and the ultimate recommendation for Australia’s relatively liberal approach to amendments (which is abolishment, it seems to be a foregone conclusion that

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change is coming. It’s unlikely that anything will be implemented in the next 18 months, but we should know more What is the common law position? in the coming year. In any event, depending on how transitional provisions are defined, there will no doubt at some In broad terms, what we have now is something of a subjective stage be a rush on innovation patent filings. Some users of values-based test. It comes down to an assessment of whether the system are already considering a pro-active approach to a given invention is actually computer-related technology (for secure rights before mass filings lead to substantial exami- example the invention relates to the way in which computers nation backlogs. are used), or whether the invention is an abstract scheme or concept which could be performed without the need for computer technology (even if that would be terribly ineffi- How has the patentability of cient). This assessment is directed very much to the substance computer implemented inventions of the invention; if a specification is drafted so as to make it changed in recent years? clear that the invention is in the concept (and not the computer implementation), then it is unlikely that any amount of There has been a period of flux, but it appears that the posi- creative claim re-drafting will be successful in supporting a tion of computer implemented inventions is finally becom- valid position. ing somewhat settled. We now have a Full Federal Court decision in Research Affiliates LLC v Commissioner of Patents In terms of international comparisons, Australia has not gone 2014 FCAFC 150, and another is on the way in a Full Court down the same sort of technical contribution path as Europe, appeal of a single judge decision in RPL Central v Commis- and has not gone so far as the latest US position in relation to sioner of Patents 2013 FCA 871. Both cases were heard by the categorisation of abstract ideas. As a result, insofar as the case same panel of judges, which adds to confidence that the out- law is concerned, the Australian position is comparatively liberal comes will collectively lead to improved clarity rather than and allows for a wider range of technologies to be protected. uncertainty.

As a little historical context, there was a time when the Aus- What are some examples of tralia Patent Office would accept almost any business patentable and unpatentable method, provided there was some reference to computer im- technologies? plementation, for example a step that involved updating a database. The Australian Patent Office changed its examina- As guidance, it’s helpful to look at the actual inventions consid- tion manual in 2010, perhaps arguably influenced by corre- ered in Research Affiliates and RPL Central for guidance, along sponding developments in the US, for example the Supreme with a more recent case, Aristocrat Technologies Australia v Kon- Court’s denouncement of the machine-or-transformation ami Australia 2015 FCA 735. test in light of a more general abstract-idea exception in Bilski v Kappos 561 US 593 2010. This gave rise to Federal Court In Research Affiliates, the crux of the invention related to method- appeals. ologies for constructing an index of assets, based on non-capital characteristics of the assets. Although achieving this in a prac- In deciding Research Affiliates, the Full Federal Court found tical commercial setting would require powerful and advanced against the patentability of the claims under consideration, computing, the specification did not disclose any particular which related to utilisation of a computer to assist in generat- changes to how a computer would be used beyond its function ing a share index, whilst citing the first instance RPL Central as a calculation tool, which was ultimately fatal to patentability. decision with approval (and hence indicating that web-delivered interfaces remain in the patentable realm). In doing so, a In RPL Central, the invention related in broad terms to a com- distinction was drawn between: (i) cases where the signifi- puter framework that was configured to generate and present cance of the invention lies in the context of a scheme, as op- questions to a user (for example via a web page) thereby to as- posed to any specific effect generated by the computer, which sess competency against recognised qualification standard. At are not patentable; and (ii) cases where the use of a computer a technological level, there was nothing especially groundbreak- is directly tied to the substance of invention, which are ing or unusual; the computer system did little more than select patentable. and present questions, receive responses, and allow file uploads. However, the application of this form of computer interface to a particular purpose was held to satisfy the relevant requirements. So, although the underlying inspiration for the invention came from a business problem, the solution was specific and technology based. A key point is that the computer had rele- For a long time, there has been a view vance at a user-experience level, as opposed to being a mere cal- that the regime is perhaps a little too culation tool. good to be true The general message coming from a contrast between Research Affiliates and RPL Central is to ensure that, when drafting a specification, attention is given to describing specific computer-implementation approaches, such as user interfaces and

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Are further changes on the horizon? There is a limit of five claims, which The High Court of Australia may yet weigh in on the subject matter eligibility debate. Although Research Affiliateswas not the often causes applicants to pursue subject of a High Court appeal, the High Court is currently de- liberating over the patentability in the context of genetics in multiple innovation patents in parallel D’Arcy v Myriad Genetics2014 FCAFC 115 (September 5 2014).

To date, the Myriad Genetics proceedings have had a limited follow-through effect to computer-implemented technologies. However, the High Court has an opportunity here to make wholesale changes to the underlying case law, which at this stage the like. This serves to differentiate the specific role of a com- is derived primarily from a 1959 decision. If the High Court puter from one of mere efficiency and calculation to some- does indeed hand down a decision that substantively alters the thing more functional and meaningful (although, based on the patentability landscape, the Federal Court is well positioned to invention in RPL Central¸ there is not necessarily a require- weigh in on the relevance of those changes to the computer ment for inventiveness in the sorts of underlying computer technology space. Specifically, the Full Federal Court heard an technology used). appeal of RPL Central earlier this year, and a decision is yet to issue. Given that the same judges have already expressed ap- Moving further along the patentability pathway, the claims of proval of the primary judge’s reasoning, it would not have been Aristocrat Technologies Australia v Konami Australia 2015 FCA surprising if a decision had issued quite soon after the hearing. 735 related to ‘a random prize awarding feature ... on a gaming Accordingly, there is a suspicion that the Full Court is awaiting console’. In that case, the Nicholas J (who was also a member the High Court’s reasoning in Myriad Genetics before coming of the panel for Research Affiliates and RPL) gave the question to a final conclusion. of subject matter eligibility relatively little attention in the judgement, indicating a general presumption that gaming machine The Myriad Genetics is quite interesting in itself, with the Federal technology is fairly uncontroversial from a patentability view- Court on both occasions finding in favour of patentability point. It seems fair to suggest that a similar conclusion would (quite at odds with corresponding litigation before the US be reached in the context of more complex software and com- Supreme Court). As an IT-focused practitioner, I find the argu- puter technologies. ments fascinating, and look forward to seeing what comes of the High Court’s deliberations.

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A red flag for IP holders

Aminiasi Vulaono and Artika Prasad of Pacific Islands Intellectual Property Services advise IP holders to take note of capital gains tax regulations when selling their intellectual property in Fiji

P owners need to be aware that selling their intellectual property in Fiji can attract capital gains tax (CGT). A recent ruling by the Fiji Tax Tribunal took an IP owner from New Zealand by surprise. On February 25 2015, the Fiji Tax Tribunal made a ruling in the matter of A New Zealand IP holder v Fiji Revenue and Customs Authority (ac- tionI 6 of 2014) where CGT was imposed at the rate of 10% on the sale of registered trade marks held by a New Zealand company. The case raised interesting issues for any IP holder in Fiji, whether resident or non-resident.

Facts of the case

The case was bought under section 82 of the Tax Administra- tion Decree 2009 of Fiji to review the decision of the Fiji Rev- enue and Customs Authority, who imposed on a New Zealand company a 10% capital gains tax on the sale proceeds of its IP.

The New Zealand Company (taxpayer) incorporated under the laws of New Zealand held intellectual property in its brands

The case raised interesting issues for any IP holder in Fiji, whether resident or non- resident

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taxpayer for the purpose of distributing, promoting, marketing, advertising and selling beer and other beverages.

It is important to note that the licensee was in fact operating in Fiji. This was considered a significant fact which resulted in the taxpayer having to pay CGT.

Aminiasi Vulaono On September 2 2012, the taxpayer entered into a sale and purchase agreement with a company in Fiji, whereby it sold all of Aminiasi is a popular, talented and dedicated IP its goodwill and IP rights in the trade marks. The intellectual lawyer, who brings reliability and personality to property was valued at $4.9 million everything he does. In the last five years, Aminiasi has made a significant contribution to PIIPS’ growth The taxpayer was advised by the Fiji Revenue and Customs Au- and success. thority that the sale proceeds were subject to 10% CGT. An objection was raised by the taxpayer and on May 30 2014, the Aminiasi represents the firm at INTA conferences, and taxpayer made an application to review the objection decision sits on the IP Legislation Review Board, which has in accordance with section 82 of the Tax Administration been set up to make Fiji’s IP legislation compliant Decree 2009. with TRIPs.

Recently, Aminiasi has taken more of a role managing Legal reasoning large trade mark portfolios for clients with interests in a wide range of foreign markets. His particular quali- In a nutshell, the Tax Tribunal in Fiji reached the conclusion ties are thoroughness and attention to detail, which that the taxpayer is liable to pay CGT under the CGT Decree make him ideal for IP legal work. Together with Artika 2011 (Decree) because the sale of its intellectual property was Prasad, Aminiasi’s practice focuses on brand clearance, a sale of an intangible asset by a non-resident, amounting to a registration, protection and maintenance, and as part sale of a capital asset which was a Fiji asset. of the PIIPS team, he specialises in advising clients on using IP to secure a commercial advantage. It is imperative to state how the CGT law was applied to the facts by the Tax Tribunal for the tribunal to conclude that the Aminiasi also represents clients within the Fiji court taxpayer had a Fiji asset as defined under the Decree. The rea- system, and is a capable litigator. He has an infectious soning may be worrisome and of great concern to non-resident and warm personality that stands him in good stead IP owners who allow their brands to be used in Fiji under a li- for all overseas conferences. Aminiasi’s personality cence agreement. IP owners must give thought as to how they and abilities assist him in maintaining excellent rela- structure any licensing arrangements in Fiji. tionships with the registries in the region. Section 6 (1) of the Decree imposes a tax known as capital gains Email: [email protected] tax on a person who has made a capital gain, other than an ex- empt capital gain on disposal of a capital asset. Under section 6(3), if the person who has made a capital gain is a non-resident, then section 6(1) only applies if the capital asset is a Fiji asset.

of alcoholic beverages. The intellectual property held by the The definition of what is a capital asset is set out in section 2 of taxpayer was trade marks registered in various countries includ- the Decree and reads as follows: ing Australia, Fiji, Japan and the US. ‘Capital asset’ means – The taxpayer entered into a licence agreement with another a) land, a structural improvement to land, or an interest in land New Zealand Company (licensee) and granted them an exclu- or including a lease; sive royalty free licence to use the trade marks owned by the b) a vessel of over 100 tonnage; c) yacht; d) a share, security, equity, or other financial asset; e) an intangible asset; f) an interest in a partnership or trust; Intellectual property such as brands g) an airplane, helicopter or other aircraft; or h) an option, right, or other interest in an asset referred to in take years to develop; how would an IP the foregoing paragraphs, other than an asset that is trading owner evidence the value? stock for the purposes of the Income Tax Act. Sale of intellectual property by the taxpayer is a sale of a capital asset, as intellectual property is an intangible asset. Therefore, paragraph (e) of section 2 is applicable.

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The second hurdle for the taxpayer was whether or not the capital asset is a Fiji asset.

Fiji assets are also defined under the Decree under section 2:

‘Fiji asset’ means – a) land, a structural improvement to land, or an interest in land or structural improvement to land, including a lease, where Artika Prasad the land is located in Fiji; b) a share in a company, or interest in a partnership or trust, if Artika heads up Pacific Islands Intellectual Property assets of the company, partnership, or trust are solely or prin- Services (PIIPS), which is the specialist IP division of cipally Fiji assets under paragraph (a); our commercial law firm, Siwatibau & Sloan. c) a capital asset of a fixed place of business in Fiji; d) a share, security, equity, or other financial asset issued by a Artika is assisted by Aminiasi Vulaono, and together they resident person; supervise two other lawyers and two IP administrators. e) an interest in a resident partnership or resident trust; or f) an option, right or other interest in an asset referred to in the Artika joined PIIPS in 2005 with the express aim of lift- foregoing paragraphs. ing the standards of IP legal services in the region to the international quality services that PIIPS now offers. It was argued by the taxpayer that the sale of intellectual prop- Artika has done this by building and maintaining the erty was not a Fiji asset, which is a contention that is most sen- right relationships with the registries in Fiji and the re- sible to argue in light of the facts. The Tribunal ruled that the gion, and the key principles that she has instilled in the sale of intellectual property was sale of a capital asset which was team are: excellent client care, which includes keeping a Fiji asset. The taxpayer’s intellectual property was an intangible the client constantly updated, providing firm time-esti- asset. mates and costings; close supervision of all filings by lawyers, complemented by the use of the latest IT tech- As the taxpayer licensed its intellectual property to a company nology to assist with her work; and, maintaining close operating in Fiji (albeit another New Zealand company) it was and regular contact with the registries in the region. held that the taxpayer had an interest in the licensee company. This conclusion was supported by the Tribunal due to the fact Artika attends INTA’s annual conferences, and in May that the licence agreement evidenced a commercial licensing 2011 was selected by the US Department of State, arrangement for a period of five years for a total amount of under its International Leadership Program, to attend merely $1, which the Tribunal stated ‘provides a likelihood that training in the protection of IP rights in the United some relationship existed between the two entities’ (the tax- States. Over the four weeks of training, Artika gained payer and the licensee). The inference was therefore made that valuable US contacts, knowledge of IP related issues there was a capital asset of a fixed place of business in Fiji. faced today, and new methods of protecting IP rights.

Further, the Tribunal in its decision stated that the taxpayer as While Artika’s and PIIPS’ main focus is on brand clear- the licensor had an interest and therefore the sale was of a capital ance, registration, protection and maintenance, in re- asset which is a Fiji asset. The tax imposed was 10% of the sale cent years she has stepped into managing large trade of IP which was valued at $4.9 million. mark portfolios for clients with interests in a wide range of foreign markets and advising clients on using IP to secure a commercial advantage. Artika has also Concerns over valuation custom built and maintained databases for clients to ensure that they are put in control of their IP. This particular ruling raises various issues for IP owners in Fiji. First, it appears that the IP rights that were sold included trade Email: [email protected] marks registered not only in Fiji but in other jurisdiction such as Australia, Japan and United States of America. Whether or not the sale price was itemised to show which portion applied to IP that was registered or exploited in Fiji is unclear. One would assume that the CGT applies to intellectual property reg- by a person on the disposal of a capital asset is the consideration istered in Fiji only. The Tribunal did enter a note that the tax- received on the disposal reduced by the cost of the asset at the payer raised the issue that the taxation should apply only to the time of the disposal. aspect of the value of the intellectual property as it was exploited in Fiji. It commented that ‘there appears no capacity within the Further, for an intangible asset, such as the sale of intellectual language of the Decree to fragment such a value’. property, the cost of a capital asset is the total expenditure incurred by the person acquiring, creating, improving and renew- The second major concern that arises from the ruling is how ing the intellectual property and any incidental expenditure to value the cost of the IP to the taxpayer in Fiji for the purposes incurred in acquiring and disposing of the intangible asset of CGT. Under section 10 (1) of the Decree, a capital gain made (section 10(3)).

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the historical cost of registration of IP (which is minimal in Fiji) or will marketing costs, and research and development costs be allowed also? Intellectual property such as brands take years to develop; how would an IP owner evidence the This ruling is a red flag to IP owners in value? Fiji in terms of tax structure A red flag for IP owners

This ruling is a red flag to IP owners in Fiji in terms of tax structure and how they structure commercial arrangements under licence agreements.

The Tribunal noted in its ruling that the taxpayer submitted that In terms of IP and tax law, the ruling is very important. It may the Fiji Revenue Customs Authority did not take into account open doors to discussion with the authorities as to how an IP any cost of the intellectual property in calculating the CGT at owner is to value the cost of acquisition of its intellectual prop- the time of disposal. However, the Tribunal further commented erty, and what sort of evidence will be acceptable to the Fiji Rev- that the taxpayer’s submission did not specify what the cost of enue Customs Authority. the asset was. It was decided that the method of calculation of CGT needs to be revisited. The ruling is also important in terms of licensing structure. In this case, the taxpayer was seen as having an interest in a capital It will be interesting to see what will be accepted by the Fiji asset which was a Fiji asset merely because the licensee was op- Revenue Customs Authority as costs of acquisition of in- erating in Fiji and because of the way in which commercial tangible assets such as intellectual property. Will it be just terms were expressed in the licence agreement.

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AFRICA Kenya, Morocco, Mozambique, South ARGENTINA Africa, Tanzania, Tunisia, Zambia and ARIPO adopts new Zimbabwe. Famous name and plant varieties protocol well-known trade mark Spoor & Fisher The following African countries have Obligado & Cia Pretoria draft legislation for plant breeders’ rights: Buenos Aires Angola, Democratic Republic of Congo, Ghana and Madagascar.

Four member states signed the Arusha David Cochrane Protocol on its adoption, namely: The Daniel R Zuccherino Gambia, Ghana, Mozambique and São On July 6 2015, the African Regional In- Tomé and Príncipe. The Protocol will re- So-called well-known trade marks enjoy tellectual Property Organisation main open for signature by member a privileged level of protection, which is (ARIPO) adopted a new Protocol for the states of ARIPO until December 31 basically evidenced by two aspects. First, Protection of New Varieties of Plants 2015. The Arusha Protocol will only the legal system provides protection even (the Arusha Protocol) at a diplomatic come in to effect once four countries in cases where a trade mark in such a con- conference that was held in Arusha, the have ratified it. dition – being well known – has not United Republic of Tanzania. been registered. Second, the specialty If all of the ARIPO states that may be des- principle whereby a trade mark is only ARIPO was created as a result of a diplo- ignated in a patent application adopt and legally protected in relation to those matic conference held in Zambia in 1976. ratify the Arusha Protocol, then plant products or services for which its regis- Membership of ARIPO is open to all breeders’ rights protection will eventually tration was requested and granted is not member states of the United Nations Eco- be available via the ARIPO system in applicable to these types of trade marks.

INTERNATIONAL BRIEFINGS INTERNATIONAL nomic Commission for Africa. At present Botswana, The Gambia, Ghana, Kenya, there are 18 ARIPO states that may be des- Lesotho, Liberia, Malawi, Mozambique, Consequently, a well-known trade mark ignated in a patent application: Botswana, Namibia, Rwanda, Sao Tome e Principe, must be protected by its own nature, re- Gambia, Ghana, Kenya, Lesotho, Liberia, Sierra Leone, Sudan, Swaziland, Tanzania gardless of whether it distinguishes iden- Malawi, Mozambique, Namibia, Rwanda, (mainland), Uganda, Zambia and Zim- tical or different products. The international São Tomé and Príncipe, Sierra Leone, babwe. As mentioned above, the only briefings section in Sudan, Swaziland, Tanzania (mainland), ARIPO states that have plant breeders’ In a recent decision Tinelli Juan v Tinelli Managing IP comprises Uganda, Zambia and Zimbabwe. These rights protection today are Kenya, Marcelo Hugo, August 5 2014, Division 1 updates contributed by are mainly the east African, English-speak- Mozambique, Tanzania, Zambia and of the National Court of Appeals on Fed- firms on a jurisdictional ing African countries. Zimbabwe. eral Civil and Commercial Matters of the basis. These updates city of Buenos Aires reversed the First In- are sponsored by each The aim of the Arusha Protocol is to pro- The Arusha Protocol is modelled on the stance Court’s decision and distin- correspondent, and all vide protection for new plant varieties by 1991 Act of the International Union for guished between the fame a person’s the contact details are way of a sui generisplant breeders’ rights, also the Protection of New Varieties of Plants. name may have from the fact that the listed on the last page. known as plant variety protection, system. There are strong reasons for the adoption name itself may constitute a well-known Please contact the firms and ratification of the Arusha Protocol, trade mark. directly with any Today, the following African mainly because a strong system for the queries arising from countries/regions have legislation for the protection of plant breeders’ rights can The controversy occurred between a these articles. protection of new plant varieties (plant increase investor confidence in a country food products businessman carrying the breeders’ rights): OAPI (the member and also encourage the development of same surname (Tinelli) as that of an ex- states of OAPI are Benin, Burkina Faso, and access to new and better varieties of tremely famous TV host and entertain- Cameroon, Central African Republic, plants. At the same time, serious concern ment producer – Marcelo Tinelli – in Chad, Congo, Comoros, Equatorial has been expressed in some of the Argentina. Guinea, Gabon, Guinea, Guinea Bissau, ARIPO member states regarding the Ivory Coast, Mali, Mauritania, Niger, possible negative influences that plant The renowned presenter had opposed Senegal and Togo), Egypt, Ethiopia, breeders’ rights could have in these coun- the registration of a trade mark in class 29 tries. In Africa, where traditional farming (food products) requested by the men- methods are conducted by small and tioned businessman, by stating that his subsistence farmers, concerns have been name constituted a well-known trade raised that plant breeders’ rights could remark. There are strong reasons for the strict the age-old practices whereby African farmers save, use, share and sell The Court held: “…the fame of the pre- adoption and ratification of the seeds and propagating material. senter and producer Marcelo Hugo Arusha Protocol Tinelli cannot be controverted. However, It remains to be seen which ARIPO considering it is a ‘well-known trade member states decide to adopt and ratify mark’ that may account for an exception the Arusha Protocol. to the application of the principle of

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specialty, and that its effects may reach many millions of dollars in litigation costs In this article we will discuss how Belgian also the mere mentioning of his surname due to the intrinsic value of the patent. national patent law deals with the so- (not even registered as defense trade The best experts in the field are normally called issue of simultaneous protection mark) is a completely different thing.” utilised. Their ability to not be tainted by of the same invention by a European and hindsight in their searching of the subject a national patent. We will also provide Based on these and other arguments, the domain for suitable avenues of research some practical advice to ensure optimum Court reversed the first instance judg- publications is close to impossible. This protection of your invention. ment and declared as groundless the op- was not treated as significant by the court. position raised by the famous TV host In Belgium, simultaneous protection, against the trade mark application Tinelli The obviousness standard has become a also referred to as double protection, is in class 29. totally artificial construct. The main dealt with according to Article XI.86 of judgment accepts this in noting the per- the Belgian Code of Economic Law code son skilled in the art is “a pale shadow of dealing with national patent law. AUSTRALIA a real person – a tool of analysis which guides the court”. Article XI.86 states, in summary, that Moving towards Europe where a Belgian patent relates to an in- on obviousness For global patent practitioners, the Aus- vention for which a European patent has Shelston IP tralian process now looks like a closer hy- been issued to the same inventor or his Sydney brid of the European obviousness successor in title, with the same filing analysis, with our starting point approxi- date, or if priority has been claimed with mating the European problem-solution the same priority date, the Belgian patent starting point, of having the closest prior insofar as it protects the same invention art document, no matter what its source. as the European patent, ceases to have ef- Peter Treloar fect from either: The alignment with European practice is a) the date on which the period for filing Our highest court has confirmed that even more likely after the further 2013 an opposition against the European Australia has moved closer to the Euro- amendments intentionally introduced by patent expires without such an oppo- pean standard on obviousness. Tradition- our Patent Office. sition being filed, or ally, Australian Law has presented b) the opposition proceedings are finally defendants with a difficult hurdle on ob- closed and the European patent is up- viousness when trying to invalidate BELGIUM: PATENTS held. patents. Under our historical test, it was necessary to show a document was part Simultaneous protection In practice, when the European patent of the skilled workers “common general by a European and a application claims the right of priority of knowledge” before it could be utilised in national patent the national patent application, the inven- an obviousness attack. GEVERS tion is usually described and claimed in Brussels the same or substantially the same way. If Our High Court, in Astrazeneca AB v Apo- the claims of the European patent as tex Pty Ltd [2015] HCA 30, has recently granted are exactly the same as the claims confirmed that legislative amendments of the national Belgian patent, the Belgian in 1990 and 2013 have significantly patent clearly ceases to have effect after shifted the obviousness balance in favour Nikolaos Minas and Jos Van Reet the period described above. In that case, of defendants, especially in high stakes generally it doesn’t make much sense to originator–generic drug battles. Depending on your patent strategy, you keep the Belgian patent alive by paying might have decided to protect your in- the renewal fees. The patent at suit dealt with the anti-cho- vention by first filing a priority founding lesterol drug Rosuvastatin, a statin which national patent application. The aim of However, when the scope of the inde- was found to be particularly active at low this strategy might be to get a quick grant pendent claim of the European patent dosage levels. The generics attacked the in the desired jurisdiction. The national has been limited with one or more addi- low dose patent for obviousness. Our high- application can then be followed by a Eu- tional features, while the Belgian patent est court, on appeal, accepted the proposi- ropean patent application designating the has remained unamended, it could be tion that a well-resourced researcher would state in which the national application useful to keep the Belgian patent alive. effectively scour the world’s databases for was filed and claiming the priority or hav- all articles on statins, and find the closest ing the same effective date as the national In practice, one can do this by simply prior art to the invention. patent application. If both the European paying the renewal fees, since it is up to and the national patents are granted, you the court to decide whether the Belgian The new position almost appears to might wonder whether your invention patent ceased to have effect or not. In countenance the use of hindsight, partic- can be simultaneously protected by both view of the strict interpretation of the ularly in this subject domain. With any the national and the European patent in wording “the same invention” in accor- patent battle over a highly successful drug the state in which the national applica- dance with the case law of the boards of or product, the parties are likely incurring tion was filed. appeal of the EPO, it could be argued that

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although the same invention is described trade marks including !SOLID, sells its passed certain amendments to the Law in the Belgian and the European patent, products via bricks-and-mortar and on Promoting the Transformation of Sci- the European patent does not protect the online stores. CNS is the proprietor of entific and Technological Achievements. same invention insofar as the scope various !SOLID trade marks for goods With the change, the Law now provides thereof has been limited to the additional in classes 18 and 25 and services in a general framework for the exploitation feature in the independent claim. More- classes 35. of scientific and technological achieve- over, according to Article XI. 56 of the ments, and for the remuneration of in- Belgian Code of Economic Law, the CNS discovered that Lidl had opened ventors and those who made great owner of a Belgian patent can revoke the various SOL!D Outlet Store stores in contributions to the achievements. patent partially by filing amended claims. Belgium, in which Lidl sold leftover By limiting the independent claim to an- goods coming from its regular stores. Lidl The amendments are favoured by the other feature, the Belgian patent could be offered a large variety of products, includ- Ministry of Science and Technology, argued to protect a different invention ing clothing, at very low prices. with the aim to increase commercialisa- than the European patent. tion of R&D achievements made by uni- After putting Lidl on notice for unautho- versities and enterprises. The Therefore, if you have a Belgian patent rised use of “solid” in among others its amendments specifically allow universi- and an equivalent European patent, store name SOL!D Outlet Store, CNS ties to dispose of their own R&D IP. This which has a narrower scope of protection took legal action by means of injunctive is clearly to incentivise researchers and than the Belgian patent, we would advise proceedings. professors, although this may not be suf- you to keep both patents in force in Bel- ficient to alleviate the concerns among gium and evaluate your options to Lidl’s first claim for annulment for lack of the Chinese academic community that amend the Belgian patent at a later time, distinctive character failed. Lidl’s argu- selling state-owned assets (which could especially in the case of infringement. ment that the trade mark !SOLID lacked include IP rights) at an undervalue can distinctive character and constituted a result in criminal sanctions. mere reference to characteristics of the BELGIUM: TRADE MARKS goods, was put aside by the Court. Sug- The phrase “scientific and technological gestive or associative terms cannot be achievements” as used in the Law include Solid ruling on trade considered purely descriptive and inca- achievements that are made through sci- mark descriptiveness pable of functioning as a trade mark, the entific research and technological devel- GEVERS Court ruled. Lidl’s further argument that opment, and have practical value. The Brussels punctuation marks cannot help establish amendments introduced a concept of distinctive character in signs was not “service scientific and technological taken into account either, since the Court achievements,” which is similar to service ruled that the “!” at the beginning of a invention. Such service achievements are sign does because of its unusual position those developed for finishing work tasks Katia De Clercq contribute to the distinctive character. of research institutions, universities and companies etc, or those developed by In a recent decision of the Commercial Lidl’s claim for revocation for lack of suf- mainly using the material and technical Court of Brussels, the court ordered Lidl ficient use was also put aside since CNS conditions of the aforementioned enti- Belgium to cease all use of the sign SOL!D provided a substantial amount of proof ties (Article 2). in Belgium because it infringes the showing the opposite. The Court subse- !SOLID trade marks registered in the quently imposed injunctive measures on The amendments specifically added one name of CNS Group (Commercial Court Lidl stating that there was an obvious risk provision to encourage universities and of Brussels July 28 2015 – CNS Group SA of confusion between the signs and trade R&D institutes to assign or license tech- v Lidl Belgium GmbH & Co KG). marks in question. nologies to companies (Article 17). To take things further, another provision CNS, a Scandinavian manufacturer of (Article 18) allows the state-owned textiles, selling clothing under various CHINA: PATENTS R&D institutes and universities to decide on their own how to assign or license New possibilities for their IP rights. The pricing of IP rights cross-border research can be done through negotiation or pub- The amendments specifically AnJie Law Firm lic bidding. If it is done through negotia- Beijing tion, such price needs to be publicised. added one provision to All this would be a significant step forward, as most state-owned universities encourage universities and R&D and R&D institutes have been weary of institutes to assign or license being seen as selling their state-owned IP He Jing and Li Ka-Yin rights cheap and risk criminal liability. technologies to companies Whether or not the amendments will On August 29 2015, the Standing Com- completely address the concern needs to mittee of National People’s Congress be monitored.

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This provision may have been inspired businesses or MNCs, but the scope of public and simply take off, completely by the US Bayh-Dole Act. Even the direc- the Law is so broad that they may have beyond the trade mark owner’s tor-general of Ministry of Finance to pay attention. The Law seems to influence and control. quipped that the amendments are in- allow business employers to get around tended to “create many millionaire pro- through contracts, but there is always This lack of control may have serious fessors.” If the amendments indeed work the risk that some employees may consequences as the trade mark owner as designed, it may facilitate the commer- come back to argue that the “huge gap” will need quickly to consider whether to cialisation of IP rights between industries between the company rules/employ- accept the nickname as its own and try and universities. ment contract terms and the statutory to get it registered, or to try to divert the scheme is unfair and to seek to invali- market’s attention to a hastily devised The highlight of the Law as amended is date those terms in the employment Chinese mark, often at considerable the new statutory scheme for the award contracts that are meant to get around expense. and remuneration of inventors and those the statutory scheme. who made great contribution to the In a jurisdiction such as China, where achievements. The Law allows holders of The uncertainty may remain until some bad faith applications abound, registry pi- scientific and technological achieve- clear rules are provided. Another area to rates are very often quicker on the draw ments to exploit such achievements watch is whether SIPO will take inspira- and file first, requiring extended legal ac- through investment, assignment, licence tion from this Law in its pending draft tion or painful attempts to purchase the and cooperation etc. And Article 44 of service invention regulations. relevant marks — typically at a very high the Law already provides that, for service price. The ever-growing grey market, eas- scientific and technological achieve- For companies that are interested in ier online access to information and pub- ments, inventors and those who made cross-border collaboration, it may be the lic awareness of large payouts to registry great contributions to the achievements time to reach out to their partners in Chi- pirates have exacerbated problems on are entitled to award and remuneration. nese universities and research institutes this front over the years. Relevant entities can establish internal for new possibilities. policy and rules or negotiate with tech- A Chinese-language mark is nearly al- nical staff regarding the manner, amount ways required by distributors and retail- and timeline etc of the award and CHINA: TRADE MARKS ers to market products in the PRC. Even remuneration. if only the original language mark is Chinese-language prominently used on product or packag- Where relevant entities have not estab- trade marks ing, a Chinese mark is generally required lished such internal policy and rules, or SIPS Hong Kong for use in online advertising, media com- could not reach such negotiated agree- Hong Kong munications, labelling and commercial ments, Article 45(1) of the Law provides documents. that those who made great contributions to completion and/or transformation of It is therefore essential to include the cre- the service achievements shall receive ation of Chinese-language trade marks in awards and remunerations according to Clifford Borg-Marks any plans for market entry, to clear and the following standards: apply to register such marks well in ad- 1) where the service achievements are A Chinese-language trade mark is es- vance, and to test them in focus groups assigned or licensed to third parties, sential for the introduction of a for attractiveness and suitability no less than 50% of the net profit of branded product or service to the the assignment or licence; Chinese market. The term Chinese-language is an amor- 2) where the service achievements are phous concept. The official language and invested as capital, no less than 50% Most Chinese consumers tend to use the lingua franca of the PRC and Taiwan is of the relevant capital stock or invest- Chinese counterpart of a foreign mark in Putonghua (also known as Mandarin and ment ratio; conversation, even where no Chinese Guoyu). This is based on the Beijing di- 3) where the service achievements are mark is actually used on a product. If the alect – only one of numerous dialects exploited by themselves or through trade mark owner fails to provide con- spoken by Chinese people. cooperation, no less than 5% of the sumers with a Chinese mark, one is likely operating profit gained by exploiting to arise spontaneously in the trade, Some dialects are totally different pho- such achievements for three to five among consumers and occasionally in netically and mutually incomprehensi- consecutive years after the achieve- the tabloids. ble, but they are all linked by the same ments are successfully transformed. written language throughout the PRC. These nicknames can be unattractive This means that a Chinese character (or The significance is that for state-owned from a marketing perspective, often de- ideogram) may be pronounced very dif- research institutes and universities, the viate from corporate branding philoso- ferently in Putonghua and Cantonese, the statutory scheme as set out above is phy, and may be detrimental to the latter being the primary dialect spoken in compulsory. image and value of the underlying brand. Guangdong, Hong Kong and Macau. That said, some such marks do occa- The Law does not target private sionally capture the imagination of the The issue is further complicated by the

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fact that the PRC adopted a set of simpli- throughout Greater China from a cul- After the EPO had informed the appli- fied characters (meant to improve liter- tural, marketing and corporate per- cant of the text they were willing to ac- acy), while Taiwan, Hong Kong and spective? cept under Rule 71(3) EPC, the Macau retain the traditional or complex • Has the brand owner’s trade name al- applicant had to pay the fees for characters. ready been translated into Chinese, grant/publishing, any claims fees due, and if so, is it suitable for adoption as and file translations of the claims within While many educated Chinese can read a trade mark? the specified period. both forms, the general practice is to file Chinese trade marks in simplified char- Local agents and distributors are often With the amendments in 2012, the appli- acters in the PRC. The simplified version able to provide answers to such ques- cant was allowed to make further amend- serves to block a later mark using the tions, though it is also sometimes advis- ments within the specified period, and – complex characters. Some may opt to file able to conduct independent surveys. if the amendments led to an allowable text a mark in complex characters for histori- – a second Rule 71(3) communication is cal reasons or for the added cachet, and Where a brand owner needs to come up issued. Otherwise examination proceed- this too will block subsequent filings in with a fresh Chinese mark, it would be ings would be resumed. simplified characters. best to look at Greater China as a single market and to try to create a mark that The procedural changes in 2012 allowed There are many homonyms in the Chi- works and is available in the various applicants an extra opportunity for nese language. A search through a Chi- jurisdictions. amendment. However, even simple nese dictionary will reveal over 40 amendments, such as correction of characters with the same BAI Romanisa- Brand owners generally have the follow- spelling mistakes, required the EPO to tion. This means that the Romanised ing options in devising a new Chinese issue an additional Rule 71(3) form of a Chinese character mark will mark: communication. not block applications for the said Chi- • The conceptual route – selecting a di- nese character mark. rect translation – the Chinese coun- The EPO has now given applicants the terpart for Apple is 苹果(pronounced opportunity to “waive” any additional These various factors mean that trade Ping Guo), the Chinese word for the Rule 71(3) communication, so that the mark owners need to consult counsel fruit. final stage of the EPO procedure can be that understands the linguistic and cul- • The transliteration route – selecting simplified. Hence, instead of filing amend- tural nuances, as well as the potential a combination of characters with a ments, waiting for the EPO to consent, legal pitfalls. generally positive or neutral connota- and then filing claim translations and pay- tion and that phonetically approxi- ing the required fees, an applicant can: In choosing a Chinese counterpart mark, mates the foreign mark – the Chinese • expressly indicate that they wish to a few questions should be asked. counterpart for Disney is 迪士尼 waive their right for a further Rule • Does a Chinese version (or indeed (Dishini). 71(3) communication; several versions) already exist in rele- • The combined route – combining • identify the amendments made, and vant markets? conceptual and phonetic elements – indicate where they have basis; • Who created and used any such ex- Starbucks becomes 星巴克 (Xing- • file translations of the (amended) isting Chinese versions? What was bake), where the first character means claims; and the period of use and how familiar are “star” and the other two characters • pay the fee for grant and publishing, they among consumers? phonetically approximate the rest of and any claims fees due. • Have the Chinese marks already been the mark. registered in the relevant jurisdic- If these four acts are carried out within tions? Are they still available for reg- the Rule 71(3) period, the applicant is istration? EPO deemed to have approved the grant of • Are candidate Chinese marks suitable the amended patent text and the biblio- Amended EPO graphic data. The application will pro- procedure up to grant ceed to grant without further possibility Inspicos for amendment. This new possibility should Copenhagen This new possibility should improve the improve the procedure up to procedure up to grant for European patent applications in which minor errors are grant for European patent noted at a late stage in the proceedings. applications in which minor Edward Farrington However, in cases of doubt, care should be taken not to waive an additional Rule errors are noted at a late stage Back in 2012, we reported that the EPO 71(3) communication, so that the exam- procedure up to grant had been ination procedure might be resumed. in the proceedings amended, with the amendment of Rule 71(3) EPC and the introduction of new The new procedure under Rule 71(3) Rule 71a EPC. became available from July 1 2015.

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EUROPE The CJEU ruled that if the reputation of an In the opinion of the Federal Supreme earlier CTM is established in a substantial Court, the subject matter of the main Impulse with a part of the EU, even if it coincides with the claim only differed from the state of the reputation! territory of a single member state only, art in that the unlocking was displayed to V.O. other than the state in which the applica- the user by a graphical representation. In The Hague tion for the later national mark was filed, it particular, a graphical feedback was pro- must be held that that mark has a reputa- vided to the user with respect to a re- tion in the EU. The criteria laid down by quired user input. This feature was not to the case-law concerning the genuine use of be considered when assessing the the CTM are not relevant in order to estab- patentability because it did not solve a Denys Bertels lish the existence of a reputation thereof. technical problem, but merely simplified the operation of the device for the user Unilever opposed a Hungarian national It furthermore ruled that if the earlier by graphical measures. trade mark application for being too sim- CTM mark has already acquired a repu- ilar to its Community trade mark tation in a substantial part of the EU, but The decision is in line with an earlier (CTM) Impulse. The national authori- is not known by the relevant public in the judgment of the Federal Supreme Court. ties rejected the application, stating that member state of the opposed national In its decision Wiedergabe topographischer the CTM had established a reputation mark, the proprietor of the CTM may Informationen (X ZR 47/07), the Federal across the EU. The applicant Iron & still benefit if a commercially significant Supreme Court emphasised that the Smith appealed against this decision, ar- part of the public in the member state is geometric projection of a part of a topo- guing that Unilever’s CTM had no repu- familiar with the earlier mark and makes graphic map was to be considered as rep- tation in Hungary. a connection between the CTM and the resenting non-technical features. Also in later national mark. Furthermore, taking this case, for assessing inventive step, The Budapest court was unsure whether into account all the relevant factors in the these non-technical features were taken the CTM needed to have a reputation case, there should be an actual and pres- as being disclosed by the state of the art. within Hungary in order to oppose an ent injury to the CTM or a serious risk application in that same country and also that such injury may occur in the future. Consequently, the Federal Supreme sought clarification on how a CTM Court has maintained its previous rul- owner can establish that it has a reputa- Consequently, trade marks with a sub- ings, and follows the European perspec- tion outside the borders of a national stantial reputation in the EU can, under tive regarding the technical character of state. It asked the following questions to these circumstances, benefit from protec- displaying information and the mixture the Court of Justice of the EU: tion even in member states where the of technical and non-technical features as 1) Is it sufficient for a CTM to have a trade mark has no reputation and is only established by the EPO Boards of Appeal reputation in one member state, even partially known. settled in T 258/03 – Auction if this is not the member state of the method/HITACHI or in T 641/00 – Two opposed application? identities/COMVIK, or more recently in 2) May the territorial criteria laid down GERMANY T 1741/08 – GUI layout/SAP. by the CJEU regarding the genuine use of a CTM be applied when ex- Technical character of amining the reputation of such a graphic feedback GREECE mark? Maiwald Patentanwalts GmbH 3) If the proprietor of an earlier CTM Munich Pharma product pricing mark has proven that the mark has a now ignores patents reputation in countries other than the Patrinos & Kilimiris member state in which the national Athens trade mark application was lodged, may he also be required to adduce Simon Quartus Lud conclusive proof in relation to that member state? In the court decision X ZR 110/13, the 4) If the answer to the previous question Federal Supreme Court discussed the Constantinos Kilimiris is no, bearing in mind the specific fea- technical character of the graphical pres- tures of the internal market, may a entation of information. The patent in The pricing of medicinal products has al- mark used intensively in a substantial suit related to a device with a touch-sen- ways been a hot issue in Greece, even part of the EU be unknown to the rel- sitive display that could be unlocked via more in recent years, when the govern- evant national consumer even if there gestures performed on the touch-sensi- ment is under pressure to drastically re- can be no risk of detriment to, or un- tive display. As a result of user input, sen- duce the spending on health care. fair advantage being taken of, a mark’s sory feedback is provided by the device. repute or distinctive character? If so, In its decision, the Federal Supreme According to the provisions applicable what facts must the CTM proprietor Court confirmed the revocation of the up to recently, other than adjustment to prove in order for that second condi- patent at first instance by the Federal the average of the three lowest reference tion to be met? Patent Court in respect of obviousness. prices in the EU, the price of an original

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medicinal product could be reduced INDIA by the defendants who were carrying on only after the patent protecting the active the alleged infringing activities in Mum- pharmaceutical ingredient (API), con- Supreme Court rules on bai. This was despite the fact that the head tained therein, had expired. copyright and trade office of the plaintiffs was situated in mark jurisdiction Mumbai, and that the cause of action had According to these provisions, the lapse Lakshmikumaran & Sridharan arisen in Maharashtra. In both these cases of the patent protecting the API of origi- New Delhi a single judge and the division bench of nal pharmaceutical products would trig- the Delhi High Court held that the suit ger a 50% drop in their price. was not maintainable just because the branch office is in Delhi. These criteria for applying such a price drop have now been changed in the con- V Lakshmikumaran On the issue of whether the plaintiff can sue text of legislation passed to apply a third in another jurisdiction, merely because they economic adjustment programme In a recent decision, the Supreme Court also happened to carry on business there, agreed with the European Commission in Indian Performing Rights Society Limited when the cause of action arises at a place in August 2015. (IPRS) v Sanjay Dalia & Ors resolved the being the principal place of business of the issue arising out of the interpretation of plaintiff, the Supreme Court ruled that: Law 4336/15, published on August 14 Section 62 of the Copyright Act, 1957 No doubt about it that a suit can be 2015 and voted to implement the struc- (CA) and Section 134 of the Trade filed by the Plaintiff at a place where tural reforms agreed with the European Marks Act, 1999 (TMA) in a suit for in- he is residing or carrying on business Commission and the IMF, provides that fringement and its interplay with the or personally works for gain. He need the expiry of patent protection will no Code of Civil Procedure, 1908. not travel to file a suit to a place where longer be the relevant triggering point for Defendant is residing or cause of ac- a price drop of original pharmaceutical An infringement suit is instituted usually tion wholly or in part arises. However, products. This is replaced by the expiry in accordance with Section 20 of the if the Plaintiff is residing or carrying of regulatory data protection. Regulatory Code of Civil Procedure, 1908. Clauses on business etc at a place where cause data protection prevents third parties (a) and (b) of Section 20 of the Code of action, wholly or in part, has also from relying, for up to 11 years, on the in- provide that a suit can be instituted arisen, he has to file a suit at that place novator’s proprietary data in order to ob- where the defendant(s) actually and vol- tain marketing authorisations and market untarily resides, or carries on business, or This reasoning of the Supreme Court, as follow-on generic products. personally works for gain. Clause (c) pro- the judgment deliberates, is in tune with vides that a suit can also be instituted in the legislative intent to ensure that imped- In practice this means that, according to the jurisdiction of a court where the iments to authors, who are deterred from the new provisions, the price of origina- cause of action has wholly or in part instituting infringement proceedings tor pharmaceutical products will be re- arisen. An explanation to Section 20 clar- merely on account of the considerable duced much earlier than in the past. ifies that a corporation shall be deemed distance of courts from the place of their to carry on business at its sole or principal ordinary residence or business, may be re- Following the publication of law office in India or, in respect of any cause moved and the proceedings may be insti- 4336/15, a ministerial decision was is- of action arising at any place where it has tuted in the local court where the author sued, on September 11 2015, to imple- also a subordinate office, at such place. ordinarily resides or carries on business. ment its provisions. This decision has set an additional criterion for applying a price However, Section 62(2) of the CA and However, it cements the fact that the pro- drop to original pharmaceutical products: Section 134(2) of the TMA confer a right visions cannot be construed to the ben- entry of a generic product in the market. on the plaintiff(s) to “institute a suit in the efit of plaintiffs who choose a suitable jurisdiction of a court where they actually forum without regard to accrual of cause According to the provisions of this min- or voluntarily reside or carry on business of action at such a place and whether or isterial decision, an original medicinal or personally work for gain”. Further, these not such a place is their principal place of product will receive a 50% drop in its provisions begin with a non obstanteclause business or branch office situate. Often price provided that the product is no – “notwithstanding anything contained the choice is based, not on the procedure longer under regulatory data protection in the Code, or any other law for the time prescribed by law but on extraneous fac- and as soon as the first follow-on generic being in force” – which until today has tors such as the convenience of the plain- product is launched in the Greek market. been construed to mean that these provi- tiff, expertise of a forum and bulk sions would have an overriding effect on litigation before a particular forum. The Patent protection is therefore no longer the provisions prescribed in the Code. clarification given by the Supreme Court a guarantee that the price of a medicinal is especially to reiterate that a suit will not product will not be reduced. The issues dealt by the Supreme Court be entertained by a court in whose juris- arose from two different matters consid- diction the branch office of the plaintiff It now remains to be seen how and when ered together on appeal owing to the sim- is located if the cause of action also arose these provisions will be applied in prac- ilarity in legal questions raised. In both the where the principal place of business is tice and what the impact on the pharma- matters, the plaintiffs sued in Delhi for in- located and the plaintiff chose not to sue ceutical market will be. fringement of their copyright/trade mark before a court in such jurisdiction.

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INDONESIA Once the complaint is lodged, the notified that the drug name for the MoLHR will do necessary verification. If generic drug newly sought approval Joint actions to take there is sufficient evidence of infringe- shall be generic name to prevent med- down copyright- ment, the MOLHR will send a recom- ical accident caused by drug mix-up. infringing content mendation to the MoCI. After the MoCI Facing a strong demand from medical Hadiputranto, Hadinoto & Partners gets the recommendation, the MoCI will practitioners, on December 27 2011, Jakarta take down the content and/or remove the Japan Generic Medicines Associa- the access rights. The MoCI will then an- tion requested members to also change nounce this on its official website. If the the drug name from brand name to contents are entirely removed, a court generic name for the generic drug al- judgment will be needed. ready approved before the above Daru Lukiantono and Wiku Anindito MHLW’s notice. Under such circum- The owner of the content and/or the stances, whether the trade mark owner On July 2 2015, a joint regulation was is- access right of the content may file a re- can register the portion of the generic sued by the Ministry of Law and Human quest to the MoLHR through the name and exclude others’ use became Rights (MoLHR) (Number 14 of 2015) DGIP to reopen the content and/or the an issue. and the Ministry of Communication and access rights. The DGIP will assess the Informatics (MoCI) of the Republic of In- request and may issue a recommenda- donesia (Number 26 of 2015) on the Im- tion to the MoCI to re-open the con- Summary of the cases plementation of Takedown of Contents tent/access accordingly. and/or of Removal of Users’ Rights to Ac- Nissan Chemical creates and manufac- cess Copyright and/or Neighbouring In the short term, this action will be tures the active pharmaceutical ingredi- Rights Infringement in Electronic Systems. mainly focused on stopping unautho- ents of therapeutic agent for rised streaming and download of movies hypercholesterolemia pitavastatin cal- The regulation is aimed to implement (or other cinematographic works) and cium. Kowa performs their global mar- measures accommodated in Article 56, songs (or other sound recording works). keting. Kowa has the trade mark right paragraph (2) of Law 28 of 2014 on specifying the designated goods as drug Copyright, which requires both the and the registered trade mark as PITAVA. MoLHR and the MoCI to coordinate in JAPAN Nissan Chemical has the patent right for shutting down electronic systems that dis- pitavastatin calcium salt and its preserva- seminate copyright-infringing content. PITAVA trade mark tion method. infringement denied Anyone who is aware of any ABE & Partners Many pharmaceutical companies man- copyright/neighbouring rights infringe- Osaka ufacture and sell generic drugs includ- ment may lodge a complaint to the ing pitavastatin calcium as active MoLHR. The complainant could be (i) ingredient. The PTP sheet packaging the author of the works being infringed; (ii) and the tablet itself had PITAVA on the copyright owner; (iii) a neighbouring them. Kowa sued Meiji Seika, Sawai, rights holder (such as performers, broad- Takanori Abe and Tomohiro Kazama Nipro, Kobayashi Kako, Towa, Kyowa, casting organisations and sound recording and Teva seeking an injunction on the producers); (iv) a licensee; (v) local collect- ground of trade mark infringement. ing societies; (vi) authorised associations; Nissan Chemical sued Daito and and (vii) other authorised parties. Mochida on the ground of patent infringement. According to the regulation, a com- Source : Trade mark No. 4942833 plainant may submit a complaint to the Among the brand name pharmaceutical Directorate General of Intellectual Prop- company’s Life Cycle Management erty (DGIP), which is part of the (LCM) strategy using patent right and MoLHR, by filing it directly to the office trade mark right, this case is about the or via the website. one using trade mark right.

The complaint should also include the following information/documents: (i) identity of the complainant; (ii) proof of Whether the trade mark owner ownership of the work; (iii) website ad- Defendant’s products dress where the infringing contents are can register the portion of the made available; (iv) type and/or name of Source : Exhibit attached to November 28 2014 generic name and exclude the content which is being infringed; (v) Tokyo District Court judgment other information related to the work being others’ use became an issue infringed; and (vi) power of attorney (if the On September 22 2005, the Ministry of complaint is being lodged by an attorney). Health, Labour and Welfare (MHLW)

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Judgments of Tokyo District defendant’s product name regarding the Judgments of IP High Court Court active ingredient, the dosage form, and the contained amount of the active ingre- The IP High Courts dismissed the ap- The Tokyo District Court dismissed all dient is attached in order to show the na- peal on the ground that the use of ap- seven trade mark infringement lawsuits ture of the generic drug according to the pellee’s mark (defendant’s mark) does filed by Kowa: (1) judgment of August notices of MHLW and Japan Generic not have a function distinguishing its 28 2014, (2) judgment of October 30 Medicines Association, and consumers goods and services from those of others; 2014, (3) judgment of October 30 2014, recognise the portion as such. Therefore, judgment of June 8 2015 (Presiding (4) judgment of November 28 2014, (5) the court held that the portion does not Judge Tsuruoka), second instance of judgment of November 28 2014, (6) have a function capable of distinguishing judgment (3), judgment of July 16 2015 judgment of April 27 2015, and (7) judg- its goods and services from those of oth- (Presiding Judge Tomita), second in- ment of April 27 2015. These judgments ers and correspond to the “use” of the stance of judgment (1), judgment of July came to the same conclusion with differ- trade mark. 23 2015 (Presiding Judge Shimizu), sec- ent reasoning as follows. ond instance of judgment (5), and judg- In addition, these courts stated that it ment of August 27 2015 (Presiding was assumed that the trade mark regis- Judge Tomita), second instance of judg- Judgment (1) (Presiding tration was done with an unfair pur- ment (2) and judgment of September 9 Judge Takano) and pose to prevent the third party other 2015 (Presiding Judge Shitara), second judgments (4) and (5) than Kowa’s licensee from entering the instance of judgment (4). (Presiding Judge Shoji) generic drug market after the patent term expired, and that allowing Kowa It is remarkable that in the judgment of These courts stated that the mark to monopolize this trade mark’s usage July 16 2015 and the judgment of August PITAVA attached to the defendant’s will unjustifiably restrict the method to 27 2015 the IP High Court held that the products was described as the abbrevi- avoid the drug mix-up and the public Article 26 (1) (vi) provided by 2014 ated name on the surface of the tablet in interest will be lost. Therefore, the Trade Mark Act amendment shall be ap- order to call attention to pitavastatin cal- court held that this trade mark right plied in this case and the appellee’s mark cium included in the products as active should be invalidated. (defendant’s mark) corresponds to “the ingredient for the purpose of preventing trade mark which is not used in the medical accidents such as dispensing Furthermore, these courts made an ad- method by which consumers are able to error and an accidental ingestion by pa- ditional remark that the method for recognize the goods as those pertaining tients caused by similarity of drug name. the brand name pharmaceutical com- to business of a particular person”. The courts further stated that medical panies to prevent generic drug manu- practitioners such as doctors and phar- factures from entering the market macists and patients as principal traders should be the exercise of the patent Practical tips or consumers recognise PITAVA as right, and it is not allowed from the such description. Therefore, these public interest point of view to assert Non-infringement of the PITAVA trade courts held that the mark attached to trade mark infringement against the mark right may be concluded with vari- the defendant’s products is not deemed PITAVA mark which was attached to ous reasons and the judges’ opinions re- to be used in performing a function ca- avoid drug mix-up. garding which reason is most persuasive pable of distinguishing its goods and seem to be divided. However, in all of the services from those of others and does judgments the non-infringement conclu- not correspond to the “use” of the trade Judgments (2) and (3) sion is firm. It seems it is because the mark. (Presiding Judge Hasegawa) judges weigh the public interest to avoid medical accident. When intellectual These courts recognised the similarity property and medical safety intertwine, Judgments (6) and (7) between the trade mark and defendant medical safety governs. (Presiding Judge Shimasue) products’ mark PITAVA. The courts further stated that attaching the trade Therefore, according to the above judg- These courts stated that the portion of mark to the designated goods not in- ments, the risk for generic drug manu- cluding pitavastatin calcium causes con- facturers to be deemed as infringing a fusion among medical practitioners that trade mark right using the portion of This decision reaffirms that the goods include pitavastatin calcium, generic name is quite low. For the brand thus the trade mark corresponds to the name pharmaceutical companies, the the threshold to prevail in one to mislead as to the quality of the primary method to prevent generic goods and should be invalid. In judg- drug manufacturers from entering the substantiating special ment (2), the court held that the trade market is the exercise of the patent right, mark should be rescinded by trial for as Presiding Judge Shimasue pointed circumstances under Section rescission of trade mark registration due out. In addition, the registration of the to the unused trade mark, and thus design or the trade mark regarding PTP 46(4) of TMA remains high seeking injunction will be deemed as an packaging or packaging design should abuse of right. be considered.

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MALAYSIA ple, the defendant cannot rely on the defence of special circumstances found in Halal certification Section 46(4) of the TMA. delay was not special It is important to update the circumstances The judge further held that the trade definition of trade marks Wong & Partners mark Oishi is a word having direct refer- Kuala Lumpur ence to the character or quality of the contained in Article 88 of te goods or services of the defendant’s trade marks, namely food and drink items and Mexican Industrial Property Law services and as such, contravenes with and/or does not fulfil the criteria of reg- Chew Kherk Ying and Chong Tze Lin istration under the TMA. In the premise, the plaintiff’s application for expunge- In the recent case of Oishi Group Public ment was allowed. its protection. Thus, the denial of trade Company Ltd v Liwayway Marketing Cor- mark protection for generic or descrip- poration [2015] 2 CLJ 1121, the High This decision reaffirms that the threshold tive terms, the specialty rule or the need Courts of Malaysia had the opportunity to prevail in substantiating special cir- to accept suggestive signs are concepts to consider the defence of special circum- cumstances under Section 46(4) of that depend on this essential function of stances prescribed in Section 46(4) of TMA remains high, and perhaps rightly trade marks as distinctive signs. the Trade Marks Act 1976 (TMA) in a so, as this places a burden on trade mark trade mark expungement suit based on owners to file and register trade marks In this regard, it is important to update the grounds of non-use. that they have bona fide intention to use. the definition of trade marks contained in Article 88 of the Mexican Industrial Section 46(4) of the TMA prescribes Property Law, which states that trade that in the event that the failure to use a MEXICO marks are visible signs that distinguish trade mark is due to special circum- products or services. That definition stances in the trade, the applicant for Protecting excludes from protection several signs trade mark expungement shall not be en- non-visible signs that are clearly distinctive, are actually titled to rely on such non-use to chal- Olivares & Cia used and perceived as trade marks and lenge the defendant’s trade mark. In this Mexico City can be graphically represented, for ex- regard, the defendant had argued that it ample trade marks constituted by was in the process of obtaining a halal sounds. certification and since the application was pending, the defendant was not in a This limitation of trade mark protection position to commence use of the Oishi Carlos Reyes to visible signs was justified in the past by mark. the need to limit the granted right mak- Trade marks are distinctive signs because ing clear the scope of protection to third The judge in reaching her decision made they distinguish products or services parties but it has no ground to exist today, reference to the case of Godrej Sara Lee from others of the same type or category when electronic means easily allow pub- Ltd v Siah Teong Teck & Anor (No 2) in the market. Thus, no matter if they are lication of these trade marks. [2008] 7 CLJ 24 decided by Justice composed of a word, a phrase, a design, Ramly (as he then was) and reaffirmed a colour or a combination of colors, the principles laid down in the case of sounds or even fragrances, trade marks THE NETHERLANDS Bulova Trade Mark [1967] RPC 29 are characterised and have to be defined (adopted in Godrej) and stated that in only by this capacity of distinguishing Defining the inventor order to qualify as “special circum- products or services from other identical V.O. stances”, the following two conditions or similar ones in the market. Amsterdam must be satisfied: a) the special circumstance must be pe- All other features or functions of a trade culiar or abnormal and must be exter- mark, from guaranteeing consumers the nal in nature; and identity of the origin of the goods or serv- b) the non-use must be as a result of ices – indicating that those with the same Jasper Groot Koerkamp those circumstances. trade mark originate from the same source – to assuring consumers the same Dutch law does not provide a closed def- In her decision, the judge agreed with the quality, facilitating their decision, and all inition on inventorship. If a patentable in- plaintiff that pending issuance of a halal advertising functions, derive from their vention arises out of an alleged certification does not constitute an ab- nature as distinctive signs. cooperation of multiple parties, this may normal external event, but merely a com- easily give rise to an ambiguous situation mercial choice made by the defendant to This distinctive character justifies the ex- with respect to entitlement. The recent purportedly venture into the halal mar- clusive rights of use that is granted to decision of Hymmen industrieanlagen v ket. As it does not satisfy the first princi- trade marks and also defines the limits of Teijin aramid (Court of The Hague,

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August 26 2015) provides more guid- claims did involve an inventive step. The this option during the mediation brief- ance on this matter. court considers the latter to be a mistake. ing and be given a copy of the Agree- Therefore, and failing to see further argument and Request for WIPO Teijin Aramid is a company manufactur- ments, the court holds dependent claims Mediation. The parties shall be given ing aramid yarns for security applications. not to provide subject-matter that could 15 days to complete and sign the Hymmen manufactures presses for man- contribute to inventive step. Conse- Agreement, and within five days from ufacturing and holds some rights of a for- quently, entitlement to sub-claims is not signing the IPOPHL Bureau of Legal mer company HGMA. Teijin and held to be relevant. Affairs Alternative Dispute Resolution HGMA have been in contact for the de- Services (BLA-ADRS) shall issue an velopment of isobaric presses for pro- order to this effect and notify WIPO. cessing ultra high molecular weight THE PHILIPPINES The WIPO Center shall then notify polyethylene (UHMWPE) fibres. Teijin the parties and conduct mediation has applied for and has been granted a Submission to under the WIPO mediation rules, in- patent on a process for manufacturing a WIPO mediation cluding the applicable fees. The parties layer of UHMWPE by means of press- Hechanova & Co, Inc may appoint a mediator from the ing. Hymmen demands entitlement to Manila WIPO panel of international media- those patents. tors which includes IPOPHL accred- ited mediators. The failure of the party Parties agree they can only claim enti- who initiated the case to attend medi- tlement to a part of a patent in as far as ation meetings is a ground for dis- the subject-matter involves an inventive Editha R Hechanova missal of the case. On the part of the step. Additionally, Hymmen submits respondent, his failure to attend would there can be no inventorship with re- The Intellectual Property Office of the lead to being declared in default. The spect to common general knowledge. Philippines (IPOPHL) issued Office WIPO Center shall notify the BLA- Although the court does not provide a Order 15-067 series of 2015 which took ADRS of the results of the mediation judgment on this matter, it follows this effect on May 7 2015, allowing parties proceedings. If mediation fails, the approach and firstly assesses inventive to have their cases mediated by the records of the case shall be returned to step per claim, indicating that entitle- World Intellectual Property Organiza- the IPOPHL for the resumption of the ment will subsequently be considered tion (WIPO). This option is advanta- adjudication proceedings. where relevant. geous for international parties or those desiring to settle their disputes involving HGMA and Teijin have cooperated in multiple jurisdictions, and the mediation RUSSIA developing an isobaric press for meetings can be done in locations other UHMWPE. HGMA argues it has ac- than the Philippines. Referral to media- Ford’s status saved by quainted Teijin with the use of an iso- tion is mandatory for IPOPHL cases IP Court baric press for UHMWPE. Based on such as: Gorodissky & Partners evidence, the court holds that use of a • Administrative complaints for vio- Moscow double belt isobaric press was already lation of intellectual property known to Teijin prior to contacts with rights. HGMA. Therefore, the court holds that • Inter partes cases, namely oppositions Teijin has not derived the basic inven- and petitions for cancellation. tion from HGMA and that Teijin is en- • Disputes involving technology trans- Vladimir Biriulin titled to subject-matter of the fer payments. independent claim. • Disputes relating to the terms of a li- The law with regard to famous trade cence involving the author’s rights to marks is unequivocal: a trade mark may Whereas in its initial summons Hym- public performance or other commu- be recognised as famous if it became men alleged that the subject-matter of nication of his work. widely known as a result of intensive use certain sub-claims lacked inventive step, • Cases appealed to the Office of the on the date of filing the application during oral hearings it argued that such Director General (ODG) from deci- among relevant consumers in respect of sions of the Bureau of Legal Affairs the goods of the applicant. There are spe- (BLA) and the Documentation, In- cial rules that regulate the procedure for formation and Technology Transfer recognising the trade mark as famous. There are special rules that Bureau (DITTB). • All other cases which may be re- Ford Motor Company initiated the pro- regulate the procedure for ferred to mediation during the settle- cedure of recognition claiming famous ment period declared by the status from 2007 and submitted docu- recognising the trade mark as Director General. ments to support its claims. These included information on 122 production famous The procedures for availing of the units in Russia, the number of cars sold WIPO mediation option are as fol- on the Russian market (almost 35,000 in lows. The parties shall be informed of 2008), etc.

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are intended to screen out marks that do What must still be observed is that to not deserve recognition. They indeed obtain coverage in Greenland and the help keep clean the register of famous Faroe Islands, a PCT application must trade marks. be nationalised in Denmark at 31 months. The application may be filed After examining the case, the panel of and prosecuted in English, and a Dan- examiners refused to grant famous sta- SCANDINAVIA ish translation of only the allowed tus to the trade mark. At first glance, the claims is to be provided at the time of decision of the Patent Office may seem Patenting in Greenland grant of the patent. By filing nationally surprising: Ford cars are cruising the and the Faroe Islands in Denmark at 31 months, not only the streets of many Russian cities. They are Zacco southernmost part of Denmark is cov- not bought and kept at home. They Copenhagen ered by the patent, but now also the ter- prove their existence on the streets ritories of both Greenland and the every day. One would not be surprised Faroe Islands. if some of the examiners drove Ford cars to take part in the hearing. What was the reasoning? Analysis of the deci- Camilla Rendal Nielsen SINGAPORE sion shows that some of the documents to prove the famous status were not Denmark is a country well-known for Positive patentability duly prepared. Some advertisements sustainability, renewable energy, espe- indication in could not be correlated with the car cially wind energy, Lego and Insulin. supplementary manufacturer. Historical and informa- What may be less known is that Den- examination tion documents were not from Ford mark has a number of self-governing Spruson & Ferguson (Asia) Pte Ltd Motor Company but from an associ- areas including Greenland and the Singapore ated company Ford Sollers Holding, Faroe Islands. booklets on the cars did not contain cir- culation numbers, diplomas and certifi- Greenland and the Faroe Islands have cates were dated 2008 while the been parts of the Danish Kingdom since recognition date was sought to be 2007, the 18th century, but now have an exten- Le Hong Minh and Kua Han Chun there was not a single document which sive type of self-government. The Faroe would show actual production and sup- Islands’ home rule was established in Following the move from a self-assess- plies of goods marked with the designa- 1948 and Greenland’s home rule was es- ment system to a positive-grant system in tion etc. tablished in 1979, and both have as- 2014, a Singapore patent application can sumed legislative and administrative only proceed to grant if the relevant re- The procedure lasted for two years, and responsibility in a substantial number of quirements are fulfilled, including the applicant was twice asked to pro- fields, including IP rights. patentability requirements. An applicant vide explanations about the submitted can still elect the examination route for documents. Unfortunately nothing was Thus, even though Denmark has been his application to meet such require- presented. As part of the recognition a member of the European Patent Or- ments. Where a positive final result from file there were also filed results of a ganisation since 1990 and ratified a PCT, corresponding or related applica- public poll. The panel recognised that Chapter II of the PCT in 1988, the tion is available, the applicant has the op- the designation used to label the cars is same does not apply for Greenland and tion of requesting supplementary indeed highly recognisable and is the Faroe Islands. examination with a view to a quick exam- known to the majority of consumers. ination of the application in a relatively The results of the public poll, however Neither Greenland nor the Faroe Is- cost-effective manner. representative, are only one of the lands are signatories of the European pieces of evidence needed to obtain the Patent Convention, despite Denmark According to recently released guidelines status and should complement other being a member. This has the implica- for supplementary examination, one cri- pieces of evidence. Also, circumstantial tion that a European patent validated in teria to be considered is whether there is information from the file shows that Denmark has coverage of only Den- indeed a positive patentability indication the trade mark Ford was used in the mark, and the protection is not ex- in the final result being relied upon. Thus, past in different (sometimes very differ- tended to the territories of Greenland care should be taken even if the claims ent) versions which are quite distinct and the Faroe Islands. being relied upon are indicated in the from the blue oval trade mark. How- final result as novel, inventive and indus- ever it is the blue oval that seeks recog- Until recently, the Faroe Islands had not trially applicable, as this may in some cir- nition as famous. even ratified Chapter II of the PCT. cumstances be considered a negative However, the patent law in the Faroe Is- indication. The result was that the Patent Office re- lands has been updated, and as of May 2 fused recognition of the trade mark as fa- 2015, it is no longer necessary to nation- This can arise because Section 14(3) of mous. It is clear that the rules of alise at 20 months to ensure that a Dan- the Singapore Patents Act provides that recognition are strict and many, and they ish patent covers the Faroe Islands. prior art documents that are applications

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having a priority date before the filing of when the adverse written opinion is- invalidation petitioner may, in addition the application under consideration but sues, then an extension of time would to relying on the originally filed evi- not published until after the filing of such have to be requested. Either option dence, submit new evidence in regard application are relevant for novelty con- above is undesirable as additional costs to such grounds as novelty or inventive sideration, but not for inventive step would be incurred. step. On the other hand, the patentee, consideration. to dispel the effectiveness of the new Moreover, even if the international ap- evidence, may sometimes need to con- Thus, if the final result being relied plication in the P- or E-category refer- duct post-grant amendment before the upon, such as an International Prelim- ence has not entered the Singapore IP Office to prevent the claims from inary Report on Patentability from the national phase by the time the examiner being invalidated. PCT application, includes a reference establishes the supplementary examina- which is of P- or E-category, particu- tion report, a patent eventually granted If the patentee fails to indicate to the IP larly P,X or E,X, the final result may be based on that report would be vulnera- Court that it has filed the amendment considered a negative indication, and ble to being challenged if it is subse- with the IP Office during the course of an objection that the claims do not ap- quently found that the international the administrative litigation, and the IP pear to satisfy the patentability require- application has entered the Singapore Court subsequently finds the patent in- ments would be raised in an adverse national phase. valid by revoking the respective deci- written opinion. For example, if the P- sions of the IP Office and the Board of or E-category reference is an interna- Thus, it is advisable to avoid requesting Appeal, there is no statutory regula- tional application designating Singa- for supplementary examination if a P- tions that shed light on whether the IP pore that has entered the Singapore or E-category reference is cited in the Court should in its ruling directly order national phase, the presence of that ref- positive final result of a PCT, corre- the IP Office to revoke the patent or erence in the final result would amount sponding or related application. Out of simply order the IP Office to make a to a prima facie negative patentability an abundance of caution, it is recom- decision to give the patentee a chance indication. mended to review the claims in light of to file a claim amendment with the IP such a reference, amending the claims Office. In this regard, the Supreme Ad- Importantly, the applicant is only al- if necessary, and requesting combined ministrative Court adopted the former lowed to submit arguments to dispute local search and substantive examina- approach in a resolution reached in a the validity of the cited reference as tion. Further, these actions should be conference of division chief judges held prior art and is allowed only one re- taken early, since the deadline for re- in April this year, the main reason for sponse during supplementary exami- questing local search and substantive this being that the parties have suffi- nation. In the event that the priority examination is 36 months from the ciently argued in the IP Court proceed- date of the cited reference is valid, the earliest priority date, while the dead- ings, and the patentee should use its objection raised in the adverse written line for requesting supplementary ex- discretion as to the need to file any opinion cannot be overcome. As a re- amination is 54 months from the amendment. This resolution was ac- sult, there are only limited options left earliest priority date. knowledged once again by the for the applicant to continue the pros- Supreme Administrative Court in a rul- ecution of the application. For exam- ing rendered in June this year. ple, the applicant may file a divisional TAIWAN application to restart prosecution. Al- Therefore, although an invalidation ternatively, the applicant may choose Post-grant patent may be found groundless by the IP Of- to withdraw the supplementary exam- amendment fice and the Board of Appeals, if an ad- ination request before the response Saint Island International ministrative litigation is filed and the deadline and elect a different examina- Patent & Law Offices invalidation petitioner files new evi- tion route. However, if the deadline for Taipei dence while the case is being examined requesting combined search and sub- by the IP Court, the patentee still stantive examination or requesting needs to consider whether a voluntary substantive examination based on an claim amendment should be filed with established search report has passed the IP Office. If an amendment is nec- Chiuling Lin essary, it should be conducted in time and the IP Court should be given no- In Taiwan’s invalidation procedure, tice. If the patentee files an amendment once the IP Office has made a determi- at the stage of administrative litigation If an amendment is necessary, it nation of the validity of each claim and and informs the Court thereof, even if should be conducted in time held that the invalidation is groundless, the Court subsequently finds the the case may be appealed to the Board patent invalid and remands the case to and the IP Court should be of Appeals and subsequently to the IP the IP Office for reexamination, it is Court. According to the provision of possible that the patentee may still given notice Article 33 of the Intellectual Property have a chance to prevent the patent Adjudication Act, during the course of from being invalidated by filing claim administrative litigation, the amendment.

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THAILAND In December 2014, the MoPH signed contest or published in any the final version of the Notification with- magazine, website etc. New alcohol out the graphic health warning provi- labelling and message sions, but with revised versions of the Contest participants must agree to trans- requirements labelling and message restrictions, in- fer all IP rights related to the submission Tilleke & Gibbins cluding prohibitions on “a message to the Thai Alcohol Control Committee. Bangkok which materially misleads consumers on Prizes are on offer to the winning designs the content of products” and “a message of ฿2,000 to ฿50,000 ($55 to $1,400), using cartoon images, except images and the deadline to submit is August 31 which are trademarks of alcoholic bever- 2015. The MoPH’s competition is a clear ages which have been legitimately regis- attempt to drum up support for the im- Alan Adcock and Aaron Le Marquer tered prior to enforcement of this position of graphic health warnings and Notification”. raise significant awareness of the issue. On January 22 2015, the Notification of the Alcoholic Beverages Control, Re: Alcoholic beverages have long been However, the delegation of this part of Rules, Procedures, and Conditions for branded and marketed with labels, con- the regulatory process to the general pub- Labels of Alcoholic Beverages was pub- tainers and packaging containing impor- lic is bound to question whether any re- lished in the Royal Thai Government tant messages depicted graphically which sultant notification or regulation is based Gazette. It sets out controversial labelling have been registered as trade marks upon internationally recognised princi- and message restrictions for alcoholic and/or service marks. The Ministry will ples of evidence-based policy making, beverages that could result in major likely argue that many such future trade and can therefore be demonstrated to be losses for the alcohol industry. The No- marks unregistered before April 22 2015 an effective and proportionate measure tification has been challenged before violate the requirements in the Notifica- to tackle genuine public health and social Thailand’s Administrative Court, but tion, and therefore operators would be harms associated with alcoholic bever- pending the outcome of that case, it has prohibited from displaying such trade ages. come into effect on April 22 2015. marks on their products in Thailand. This would disallow rights holders to use The blanket imposition of large graphic The basis of the Notification is the Alco- their trade marks in accordance with health warnings on all alcoholic beverage holic Beverage Control Act (2008) and their registration and would put those products is also likely to meet opposition its subsequent Ministerial Regulation marks at risk of cancellation based on from alcoholic beverage manufacturers (2010), under which alcoholic beverages non-use. and importers on the basis that it unrea- cannot be advertised in any way which sonably restricts their right to use their boasts of efficacies, benefits, or qualities With the Notification now in effect, the lawfully registered trade marks to market or induces one to drink. MoPH appears to be moving once more their legal products to adult consumers. toward the reintroduction of require- In January 2014, the Ministry of Public ments for graphic health warnings on al- Ministerial Notifications are, however, Health (MoPH) notified the WTO coholic beverage packaging. The MoPH subject to legal challenge in Thailand’s Committee on Sanitary and Phytosan- has now twice, in 2010 and 2014, pro- Administrative Court, which has the itary Measures of proposed labelling re- posed the introduction of graphic health power to overturn or amend unlawful quirements for alcoholic beverages. warnings akin to those already in place acts by administrative agencies or state The draft Notification prohibited use for tobacco products. officials. Upon application, the Court of various types of messages on alco- may issue an injunctive order suspending holic beverage labels and packages, in- In a novel move, the MoPH has execution of the measure pending the cluding any message “which misleads launched a public competition to design outcome of the legal challenge. consumers on the content of products” new graphic health warnings for alco- and any message “using the picture of a holic beverage packaging. The competi- cartoon”. tion requires that entries: VIETNAM • may use any graphic design tech- The MoPH issued a revised draft Noti- nique, including painting and photog- New guidance on fication in August 2014. This draft Noti- raphy; enforcement regime fication combined the labelling • must warn the public of the harms Tilleke & Gibbins restrictions with measures mandating and consequences of alcoholic bever- Hanoi graphic health warnings on alcoholic age consumption; beverage packaging. Thailand would be • must aim to deter children and the first country in the world to do so. It teenagers and the public to refrain had earlier introduced the concept of from consuming alcoholic beverages; graphic health warnings on alcoholic • must also contain “warning phases”; Loc Xuan Le beverage packaging in 2010, but this was and notified to the WTO Technical Barriers • must comply with all relevant IP On June 26 2015, the Ministry of Sci- to Trade Committee in 2010 and the laws and must be new and not ence and Technology (MOST) issued issue went silent. previously submitted in any other Circular 11/2015/TT-BKHCN

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providing guidance on the implemen- recommended removing this obligation when it stipulates that they may be re- tation of Government Decree from the circular, but the competent voked in other cases as prescribed by the 99/2013/ND-CP dated August 29 agencies did not agree. government, which provides some flexi- 2013 on administrative sanctions in in- bility in choosing enforcement bodies. dustrial property. The new circular took effect on August 11 2015. Because ad- Circular 24 clarifies domain ministrative measures play a very im- name revocation Other documents racing portant role in the enforcement of IP against the clock rights in Vietnam, Circular 11 was ea- Shortly after Circular 11 took effect, the gerly awaited as it would provide a re- Ministry of Information and Communi- There are at least two further documents placement for Circular cations (MIC) issued Circular related to the enforcement of IP rights 37/2011/TT-BKHCN dated Decem- 24/2015/TT-TTTT dated August 18 which may be forthcoming — a joint cir- ber 27 2011, a document originally de- 2015 on the management and use of In- cular relating to the coordination mecha- signed to provide guidance on the ternet resources. Among the many gen- nism between the MIC and MOST in the now-expired Decree 97/2010/ND- eral provisions of Circular 24, which enforcement of administrative decisions CP dated September 21 2010. At- takes effect on October 10 2015, there on domain names subject to IP infringe- tempts to implement Decree 99 while are brief but important provisions on a ment (this is expected to resolve the afore- referring to the old circular often led to subject of considerable interest: Guid- mentioned coordination issue) and a legal barriers and conflicts that were ance on the mechanism for resolving dis- circular on the coordination mechanism difficult to reconcile. putes over .vn domain names. between MOST and the Ministry of Plan- ning and Investment in the enforcement Though it contains are several new pro- Article 12 of Circular 24, which sets out of administrative decisions on revocation visions, Circular 11 maintains a trouble- the circumstances in which domain or removal of enterprise names/trade some provision: IP right holders should names are to be revoked, reconfirms the names subject to IP infringement. At the be aware that in the process of resolving viewpoints of the MIC on the proce- moment, it appears that these circulars domain name disputes by administrative dures for resolving domain name dis- need to be issued before July 1 2016; oth- measures in cases where the use of the putes when it mentions in Article 12.1(a) erwise they will be unenforceable, because domain name is considered an act of un- that domain names will only be revoked when the new Law on Promulgation of fair competition, the owner of the trade pursuant to the execution of minutes of Legal Documents takes effect on July 1 mark/trade name/geographical indica- successful conciliation by the parties to 2016, joint circulars between ministries tion must provide evidence demonstrat- the dispute, a legally effective decision of will no longer be defined as legal norma- ing that the infringer has continued to use an arbitrator, or a legally effective judg- tive documents that are recognised in a confusing trade mark, trade name, or ment or decision of the court. Circular Vietnam’s legal system. geographical indication in its domain 24 also mentions the revocation of do- name(s) despite being requested to ter- main names by administrative measures, Faced with such a situation, if there is not minate the use by the rightful owner. but stipulates that this revocation re- effective cooperation and a drastic plan This condition is a de facto obligation to quires a decision on administrative sanc- of action between the concerned min- send an advance warning. Many com- tions from an inspectorate of information istries, the likelihood that joint circulars menters in the drafting process had and communications [Article 12.1(c)]. will be issued prior to the time men- It does not, however, provide for the rev- tioned above is very remote, which will ocation of domain names under a deci- lead to the odd situation in which many sion on administrative sanctions from important regulations cannot practically Though it contains are several the Inspectorate of MOST, the agency be enforced despite everyone being that most frequently handles and re- aware of the risk in advance. new provisions, Circular 11 solves similar types of disputes. This shows that Circular 24 does not resolve The agencies, particularly MOST, are ac- maintains a troublesome situations where, in the past, there has tive in drafting the joint circulars to be able been a lack of coordination among agen- to resolve the difficulties related to the rev- provision cies in resolving domain name disputes. ocation of domain names and enterprise Circular 24 only opens up other possibil- names, with the hope that such efforts will ities for domain names to be revoked eventually bring about concrete results.

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MANAGINGIP.COM OCTOBER 2015 115 116 Utynam Oct15_Layout 1 9/23/15 1:58 PM Page 116 |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||UTYNAM’S HEIRS A monthly column devoted to IP curiosities and controversies, named in honour of John of Utynam – who received the world’s first recorded patent in 1449 [email protected]

Last month Utynam attended Managing IP’s third annual EU Patent Reform Forum, held in Munich and Paris, and also visited the MARQUES conference in Vienna. Here are a few impressions

Uncertainty is the only certainty

If one word summed up the views of the in-house counsel who took part in the EU Patent Reform Forums it was: uncertainty. Speaking in Paris, Simon Roberts of BT noted that the UPC could be “a happy hunting ground” for patent trolls. “Businesses hate uncertainty. They are willing to pay more for certainty,” he added. He described the proposed new patent and litigation system as “scary”.

Even those who expressed broad enthusiasm for the system, such as Gavin Lawson of Gilead Sciences, said that “the uncertainty is starting to have real implications” as companies have to decide whether or not to opt out their European patents.

This uncertainty makes business forecasting and budgeting much more difficult, as Bobby Mukherjee of defence company BAE Systems explained: if, as expected, each opt out from the UPC costs €80, then a company with 10,000 patents is facing a one-off charge of €800,000 in addition to the business time and inconvenience involved in administering the payments, checking ownership details and so on. “Budget is a key driver,” said Mukherjee, adding: “We need to be having these discussions with the business now and be ready … Business craves more certainty.”

Pot of gold

Despite the broad excitement in Europe about the new patent system, many US practitioners have yet to get to grips with it, explained Edward Kelly of Ropes & Gray. “We’re now getting visits from European lawyers saying ‘get ready’,” he said. “Often these visits are from the same people who until recently were saying ‘don’t worry, the UPC will never happen’.”

The key to selling the system to US companies, he argued, is to show how it will save money and help small businesses, rather than explaining all the subtleties of the procedural rules and the local, regional and central divisions.

Discussing the possibility of a “gold rush” by patent owners, keynote speaker Pierre Véron of Véron & Associés explained how the law on damages in the UPC could differ from national laws, while the scope of its jurisdiction could lead to high awards. Uncertainty over the limitation period might also mean “there could be a much longer period for recovering damages than under national law”, he added.

Now that’s something that really might get the attention of US companies.

Rebranding the CTM

An annual update from a senior representative of OHIM is a fixture at the MARQUES Annual Confer- ence, and often brings a unique perspective (Utynam can remember then OHIM vice-president Alexan- der von Mühlendahl explaining the BabyDry case in Oslo in 2001 just minutes after it had been decided by the CJEU).

Sadly, this year’s presentation in Vienna by Dimitris Botis was the last update from OHIM on the CTM. That is not because the tradition will be discontinued but rather, as Botis explained, that by this time next year OHIM will be known as the EUIPO and the CTM will have become the EUTM.

It may take a bit of getting used to, but Utynam thinks it’s somehow appropriate that the EU’s trade mark system is itself getting a rebrand.

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