Ip Litigation Costs Special Edition

GENEVA – FEBRUARY 2010 – No.1

2-25 IP LITIGATION COSTS SPECIAL EDITION

26 WIPO’S NEW TOP MANAGEMENT New Parties to WIPO Administered Treaties in 2009

During 2009, 68 instruments of accession or ratification of treaties administered by WIPO were deposited with the Director General of WIPO. The treaties and new adherents are as follows:

In the field of industrial property

Patent Cooperation Treaty (PCT) (1970) – Chile, Peru and Thailand (3), bringing the total number of States to 142.

The Madrid System for the International Registration of Marks (Madrid Agreement (1891) and Madrid Protocol (1989)) – Egypt, Liberia and Sudan (3) adhered to the Madrid Protocol, bringing the total number of States/IGOs to 81.

Trademark Law Treaty (TLT) (1994) – Morocco, Nicaragua and Peru (3), bringing the total number of States to 45.

Singapore Treaty on the Law of Trademarks (2006) – Estonia, France, Liechtenstein, Mali, Netherlands (The Netherlands will become bound by the Treaty three months after the deposit of the instruments of ratification of Belgium and Luxembourg), Poland, Russian Federation and Spain (8), bringing the total number of States to 17.

Strasbourg Agreement Concerning the International Patent Classification (1971) – Serbia and Ukraine (2), bringing the total number of States to 61.

Locarno Agreement Establishing an International Classification for Industrial Designs (1968) – Argentina and Ukraine (2), bringing the total number of States to 51.

Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks (1973) – Serbia and Ukraine (2), bringing the total number of States to 27.

Hague Agreement Concerning the International Registration of Industrial Designs – Germany, Poland and Serbia (3) adhered to the 1999 Geneva Act of the Hague Agreement, bringing the total number of States/IGOs to 37.

Patent Law Treaty (PLT) (2000) – France, Liechtenstein and Russian Federation (3), bringing the total number of States to 22.

In the field of copyright and related rights

WIPO Copyright Treaty (WCT) (1996) – Austria, Bosnia and Herzegovina, Denmark, Estonia, European Union, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Spain, Sweden, Tajikistan, United Kingdom and Uruguay (20), bringing the total number of States/IGOs to 88.

WIPO Performances and Phonograms Treaty (WPPT) (1996) – Austria, Bosnia and Herzegovina, Denmark, Estonia, Finland, France, Germany, Greece, European Union, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Spain, Sweden and United Kingdom (18), bringing the total number of States/IGOs to 86.

Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms (1971) – Bosnia and Herzegovina (1), bringing the total number of States to 77. GENEVA, FEBRUARY 2010

CONTENTS

2 IP LITIGATION COSTS – AN INTRODUCTION 3 U.S. CONTINGENCY FEES – A LEVEL PLAYING FIELD? 6 THE UK: CAN A HIGH-COST COUNTRY CHANGE ITS WAYS?

9 AN EU COMPETITION LAW PERSPECTIVE ON REVERSE PAYMENTS

12 A SINGLE PATENT COURT FOR EUROPE: DREAM OR REALITY?

14 IP LITIGATION IN AFRICA 16 RESOLVING IP DISPUTES IN JAPAN – COUNTING THE COST

19 A COST-EFFECTIVE ALTERNATIVE 23 KEEP IT CHEAP – TEN TIPS FOR MINIMIZING COSTS

26 INTRODUCING WIPO’S NEW TOP MANAGEMENT TEAM

WIPO MAGAZINE ISSUE 2010/1 © World Intellectual Property Organization

Editor: Sylvie Castonguay Acknowledgements WIPO Contributors Graphic Designer: Odile Conti Ignacio de Castro and Sarah Theurich (WIPO Arbitration Heike Wollgast, Enforcement and Special Projects Division, and Mediation Center), p. 19 p. 2 Cover image Berly Lelievre-Acosta, WIPO Arbitration and Mediation iStockphotos Center, p. 19 2 Working documentsof Working 2 For detailsofthecase 1 the Lion” Courts: of The Return “Copyright inthe 2/2006 Magazine agreement see WIPO and thesettlement d=17445 en/details.jsp?meeting_i www.wipo.int/meetings/ are available at the chair’s conclusions, the meeting, aswell as 2 IP LITIGATION COSTS FEBRUARY 2010 . AN INTRODUCTION IP stance, through theuseofalternative dispute reso- –foralleviating the financial burden in- on parties The ACE discussedinsome detailsuggestionsfor analysis, especiallyincivilcases. greater further useofpresumptions couldbeworth wassuggested that page 6)wasalsoraised. It change itsway?” country Canahigh-cost UK: on cases. costlyevidentialburdenThe often (see “The level ofspecialization required for directing such putes, theywere ofthe high seeninthecontext areas ofIPdis- the sametime, atleastincertain attorneys’High fees were viewed At withconcern. ing remuneration ofcreators. (IP)system inensur- property use oftheintellectual press andcelebrated asanexampleofsuccessful inthe the heirsofauthor–waswidelyreported Sleeps” endingfor case–withitshappy copyright The settlementofthefamous2006 Lion “The for making thesystem morefor accessible. making in developing atsuggestions countries, andlooked the highcostsofIPlitigation,especiallyfor litigants analysispresented,expert includingthereasons for Agenda.” The Committee discussedissues, basedon Recommendation No. 45ofthe WIPO Development holders inenforcement, into consideration taking discussions on of,“Contributions andcoststo, right organizations,and accredited focused observer its Committee, composed of States WIPO Member Committee onEnforcementAdvisory (ACE). The at theNovember 2009sessionofthe WIPO These were amongthethorny questionsaddressed environment are withinwhichIPrights respected? addressed inthebroader ofanenabling context in whatpossibleways couldhighlitigationcostsbe And, againstthatbackground,sive legalexpertise? wealthy orlarge withexpen- companiesequipped more generally, thattheIPsystem only benefits highlitigationcostsfuelaperception,ment? Do legalsteps againstinfringe- holders from taking To doesthesituationprevent whatextent right with IPlitigationishigh,ifnotexcessive, costs. litigants, oneofthegreatest obstaclesassociated significant reality, financialsponsoring. In for most theinstitutionofcasebenefited fromportance, tion. Given thesong’s anditsculturalim- popularity many respects, includingthefundingoflitiga- inmindthatthiscasewasexceptionalbe kept in LITIGATION COSTS– 1 It should, however,It 2 for minimizingIPdispute settlementcosts(page 23). Finally, tipsare provided arangeofusefulpractical cient way outofcostly andcomplexIPlitigation. whi Resolution (page 19), issue, explainsthebenefitsofAlternative Dispute Center, andMediation Arbitration ofthis co-editor Japan (page16)andtheU.S. (page3). The WIPO (page14),Europesuch asAfrica (page6and12), ofIPdispute resolution injurisdictions particularities atthecostsand IP litigationandlooksinparticular Costs addresses theaforementioned challengesin This issueofthe onIPLitigation WIPO Magazine ment andtheacceptanceofIPsystem ingeneral. to have negative effects oneffective law enforce- inmany concern countries,serious andisperceived revealedclearly expensive thatoverly IP litigationisa the matters itaddresses. Discussionsnevertheless towardsdoes notwork bindingsolutionsonany of mandate, isaforum for exchanging information and body withnonorm-setting The ACE, anadvisory into amoreprices balancedalignment. the demandfor goods–andbringing counterfeit policies andbusinessmodels–soasto diminish gestions inthatrespect touched ondefiningtrade means ofcontrolling enforcement costs. The sug- measures asapossible atpre-emptive looked registration fees. More broadly, theCommittee Such funds, itwasargued, from couldbederived fundsforstate-administered institutingIPlitigation. another suggestionwasproposed: establishing to relief.as opposed injunctive With thatinmind, payment, monetary in thecaseoflitigationseeking 3). Obviously, suchamodelcouldonlybeattractive Fees:Contingency ALevel Playing Field?” onpage basis(see of litigationonacontingency “U.S. Another approach suggested wastheconducting provisions ofthe Bill ofRights. publicinterests andcertain thereby supporting casesperyear, numberofpro-bono acertain duct association requires membersto con- itspracticing whereence wasmadeto SouthAfrica thebar thatregard, basis.gation onapro-bono In refer- ties inneed, including legalaid, orprovision for liti- on mechanismsto reduce litigationcostsfor par- field ofborder enforcement. Emphasiswasplaced page 19)orsimplifiedprocedures, especiallyinthe lution models(see “A Cost-Effective Alternative” on ch appears toch appears beaneffi- 3 U.S. CONTINGENCY FEES – A LEVEL PLAYING FIELD?

This article by William R. Towns, a partner and General Counsel at Novak Druce + Quigg LLP, focuses on contingency fee arrangements in the context of patent litigation in the U.S. Mr. Towns is a seasoned attorney and mediator whose litigation and dispute resolution practice concentrates on IP matters. He is a WIPO Approved Neutral and has served as a WIPO Domain Name Dispute Resolution Panelist since 2003.

A study of the results of patent litigation at the ly to the efforts of appellate level revealed that patentees only won lawyers working on a some 25 percent of infringement cases from 2002 contingency fee basis Photo: iStockphotos Photo: to 2004.1 While these statistics might seem to to increase the return suggest that the scales are tipped in favor of de- on their investment. fendants, the eye-popping cost of patent litiga- Detractors of contin- tion in the United States – on average $3 to $10 gency fees decry the million – can deter many accused infringers from oft-stated goal of im- fighting cases in court; it may just be less expen- proving access to the sive to pay a licensing fee or royalties than to legal system as mis- challenge a patent in court. At the same time, leading, claiming that contingency fee arrange- The eye-popping cost of patent litigation in the U.S. plaintiffs increasingly have turned to contingency ments are motivated by greed and encourage ex- – on average $3-$10 fee arrangements to spread the risk of such esca- cessive, speculative or frivolous litigation. After all, million – can deter many lating patent litigation costs, a development that contingency fee arrangements also finance litiga- from fighting cases in court. has led some to assert that the scales are now tion of upper-income and business clients that tipped decidedly in favor of plaintiffs. could easily afford to pay on an hourly basis.

Contingency fee arrangements have become a Controversial or not, there is no question that the standard practice in the U.S. for financing certain use of contingency fee arrangements in U.S. civil types of civil lawsuits. Under such arrangements, ligation has become widespread, expanding well attorneys’ fees are determined by the success of beyond the confines of tort law. In a number of the claim, and usually are calculated as a percent- other contexts, contingency fee arrangements age of the client’s recovery. A fee is charged only have proven an effective means of spreading risk, if the lawsuit is successful or is favorably settled not only for litigants with resource or liquidity out of court – a “no win, no fee” arrangement. constraints, but also for the well-financed. This includes IP matters, and particularly patent in- Often used in personal injury, medical malprac- fringement lawsuits, where the substantial litiga- 1 Paul M. Janicke, tice and commercial collection cases, contin- tion costs for both sides may be as significant an University of Houston gency fees have been widely associated with influence on the outcome of the case as the mer- Law Center and Lilan large jury awards and recoveries and, as a result, its of the claim itself. Ren, University of Houston, “Who Wins have become a focal point for advocates of tort Patent Infringement reform. But they have actually been around for at The high cost of patent Cases?,” American least 100 years, long before the onset of the cur- litigation Intellectual Property Law Association rent liability crisis. Significantly, U.S. jurisdictions Quarterly Journal, generally eschew “loser pays” systems that permit The high cost of patent litigation in the U.S. is a Vol. 34, p. 1, 2006 successful litigants to recover attorneys’ fees from major factor contributing to the use of contin- 2 See, e.g., Economic the losing party. Proponents of contingency fee gency fee arrangements. According to a 2009 Analysis of the Law 615 (7th ed. 2007), Richard arrangements observe, inter alia, that they im- economic survey commissioned by the American A. Posner prove access to the legal system by enabling Intellectual Property Law Association (AIPLA), in plaintiffs with limited financial means to obtain patent infringement cases where the amount in legal services they could not otherwise afford. 2 dispute is between $1 million and $25 million, total litigation costs average in excess of $3 million, Critics of contingency fee arrangements, on the roughly 60 percent of which is incurred during other hand, often attribute the recent “litigation discovery. In cases where the amount in dispute explosion”– the expansion of tort liability – large- exceeds $25 million, average total litigation costs >>> 4 FEBRUARY 2010

are roughly doubled. And in smaller cases where Do contingency fees level the amount in dispute is less than $1 million, the the playing field? AIPLA survey indicates that total litigation costs in some cases may exceed the amount at stake, with Proponents of contingency fee contracts argue costs through the end of discovery remaining that they protect the rights of inventors and serve roughly 60 percent of the total litigation costs. to level the playing field in what are sometimes termed “David and Goliath” battles with big busi- The case for contingency ness – perhaps a fitting analogy in cases of small fee arrangements inventors with limited means attempting to enforce their rights against well-funded corpora- In light of escalating patent litigation costs, con- tions. Contingency fee arrangements may indeed tingency fee arrangements can be seen as im- level the playing field in such situations, thereby proving access to the judicial system for the “little promoting not only the interests of small inven- IP LITIGATION COSTS IP LITIGATION guy” – in this case small inventors and others who tors but also those of the justice system and, ar- otherwise lack the means to enforce their IP guably, society at large. rights against larger, better-financed corporate defendants. Outside of this situation, however, it is questionable whether But as with other complex contingency fees are needed

commercial litigation, contin- Bob MacNeil to level the playing field in U.S. gency fee arrangements in patent litigation, and debat- patent litigation are not the ex- able whether the use of conclusive bastion of small inven- tingency fee arrangements tors and individuals. For larger, may, in some situations, tip the better-funded litigants looking scales in the opposite direc- to control litigation costs, con- tion. Patent infringement law- tingency fee arrangements suits increasingly are being may be equally attractive – A patent troll – a pejorative term for funded by non-traditional in- such arrangements spread the institutional investors using a business stitutional investors, using a model that involves acquiring patent risks of patent litigation for portfolios, not to develop goods and business model that involves small and large clients alike. services for market, but only to assert acquiring patent portfolios not Contingency fee lawyers occu- patents in court. to develop goods and services py a position analogous to that for market, but only to assert of business partners or venture capitalists, an in- patents in court.3 So-called patent trolls – a pejo- vestment model that arguably encourages them rative term for entities that acquire IP assets to to screen cases more carefully and to hold down this end – are a case in point. Contingency fee litigation costs. arrangements are conducive to using this business model, as they allow institutional investors In contrast, traditional hourly billing arrange- to effectively spread the financial risk involved in ments require clients to assume virtually all the patent litigation by partnering with their lawyers. risks of litigation. This is certainly a concern for small inventors and other potential litigants with The notion that a well-funded patent litigant liquidity issues, for whom the high costs of patent that has hedged its investment through a con- litigation may effectively preclude access to the tingency fee arrangement is merely seeking to judicial system. And while the need to spread the level the playing field is difficult for some to ac- risks of litigation may not be as pressing for larg- cept. Many businesses facing patent litigation er, well-funded litigants, controlling the high are also well funded, but not all such defen- costs of legal services is an increasing concern. A dants are large, successful corporations and, survey of in-house counsel, recently conducted given the high costs of patent litigation, some 3 See Nathan Vardi, by the Association of Corporate Counsel and The would argue that contingency fee arrange- Patent Payday, FORBES.COM (Feb. 12, American Lawyer, reports that 39 percent had in- ments tend to give plaintiffs the edge. For ob- 2008). creased their use of alternative billing arrange- vious reasons, contingency fee arrangements ments with outside law firms during the past year. are not an available option through which such The survey further indicates that virtually all patent defendants can level the playing field, changes from hourly billing arrangements were and a defendant lacking comparable risk- initiated by corporate law departments rather spreading options who is otherwise unable to than external law firms. afford the high costs of patent litigation may 5 find itself at a decided disadvantage, notwith- patent reexaminations before the USPTO is con- standing the merits (or lack thereof) of the siderable and increasing. patent claims asserted against it. A chief advantage of challenging the validity of a Patent reexaminations patent by reexamination before the USPTO is the and alternative fee decidedly lower administrative costs compared arrangements to the costs of validity challenges in patent litigation. When coupled with the possibility of obtain- Even though the evidence is largely anecdotal, ing a stay of litigation, the strategic use of reex- the conclusion that contingency fees have al- amination has changed the patent litigation tered the patent litigation landscape seems un- landscape as significantly as have contingency avoidable. Whether or not there is any correlation fee arrangements. In fact, there appears to be a between the rise of contingency fee arrange- strong correlation in time among the use of con- ments and steadily escalating legal costs in tingency fee arrangements, the emergence of patent lawsuits, there is no question that patent patent trolls and the substantial increase in third- defendants are looking increasingly to control the party requests for ex parte and inter partes reexam- significant legal costs of fighting patent claims. inations before the USPTO.

To limit the high costs of patent litigation, many Conclusion businesses are seeking alternatives to the traditional hourly rate model. There are a number of The emergence of contingency fee arrangements options, including fixed fees, conditional fees or as an effective means of spreading risk has no- reverse contingency fee arrangements. The latter ticeably altered the patent litigation stage, partic- arrangement can be difficult to implement, as it ularly in combination with the rise of so-called requires that the client and law firm agree on a patent trolls. Whether contingency fees are di- potential liability exposure of a certain amount, rectly responsible for creating a litigation explo- with the reverse contingency fee a fixed percent- sion in patent law is open to question; lawsuit sta- age of the difference between liability exposure tistics maintained by the U.S. District Courts and any lesser settlement or judgment. Some suggest the number of patent lawsuits as a per- studies suggest defendants are unlikely to choose centage of total patents has not changed contingency fee arrangements over fixed fee or markedly over the past two decades. And if con- hourly billing arrangements, because they view tingency fees encourage speculative or frivolous litigation as a purely negative gamble.4 patent claims, the strategic use of patent reexam- Contingency fee plaintiffs pay attorney’s fees on- inations by defendants, and the employment of ly if they prevail, and then only as a percentage of other cost-cutting methods, may well serve to the settlement or judgment they have recovered level the playing field, and eventually curb such in the litigation. A defendant who chooses an al- perceived abuses. ternative billing arrangement as opposed to the traditional hourly rate may succeed in lowering Patent reform legislation has been introduced in its overall litigation costs, but unlike a contin- the U.S. House of Representatives or the U.S. gency fee plaintiff, the defendant does not have a Senate in each of the last three years. The enact- settlement or award from which to pay its attor- ment of patent reform legislation in the U.S. is ney’s fees. Even for a defendant who prevails in probable – perhaps inevitable – but it is unlikely the litigation, the best result is still a net loss. to substantially or immediately impact the high costs of patent litigation, or to curtail the use of 4 See Eyal Zamir & Ilana Beyond alternative fee arrangements, a growing contingency fee arrangements in such litigation. Ritov, Neither Saints Nor Devils: A Behavioral number of defendants in patent infringement In the meantime, the debate continues to unfold. Analysis of Attorneys’ lawsuits are challenging the validity of the patent Contingent Fees 50-57. at issue through the use of administrative ex parte 5 See 35 USC, 301 et seq. or inter partes patent reexaminations before the (ex parte reexamination) & 35 USC, 311 U.S. Patent and Trademark Office (USPTO), based et seq. (inter partes on prior art references.5 U.S. Federal Courts have reexamination). the power to stay patent litigation pending completion of reexamination. There has been a significant increase in third-party requests for patent reexaminations since 2003, and the number of patent infringement lawsuits involving parallel 6 FEBRUARY 2010 THE UK: CAN A HIGH-COST COUNTRY CHANGE ITS WAYS?

This article by Michael Burdon, partner and Head of IP, Olswang LLP, U.K., focuses on patents practice in the U.K. He has participated in discussions on, and made proposals for, reform of the U.K. and European patent litigation procedure. IP LITIGATION COSTS IP LITIGATION

High-cost countries certainly can change their spent £2.4 million against Cook's £1.5 million in a ways! But before looking at how, it is worth pausing recent case on medical devices. There are no reli- to ask, first, whether the legal systems for resolving able data on the "average cost" of patent litiga- IP disputes are indeed, in some countries, "high- tion, if indeed there is such a thing as an "aver- cost" and, second, whether they should change. age" patent dispute. However, the cost of legal representation and experts in most patent dis- Counting the cost in putes conducted in the U.K. is unlikely to be esti- the U.K. mated at less than £350,000.

Patent litigation in the U.K. is often said to be ex- Maybe the cost is pensive. Part of the expense is undoubtedly due warranted? to the rigorous procedure and associated fees for legal services. However, the country’s reputation It is worth bearing in mind that there are only for being a "high-cost" jurisdiction is also proba- about 25 patent trials in the U.K. each year, com- bly due to its "loser pays" system under which the pared to the 50,000 or so patents granted annu- losing party is ordered to pay the winning party's ally by the European Patent Office (EPO). The dis- legal costs, at least in relation to those issues on putes that go to trial are of considerable which the winner was successful. In apportioning commercial value as well as technical (and some- costs, courts increasingly make deductions for is- times legal) complexity. At least one party in a tri- sues on which the winning party was not suc- al considers the costs (both its own and the risk cessful (e.g., certain pieces of prior art or an insuf- of having to pay the other side's costs) to be ficiency attack). If the parties cannot agree on the worthwhile. Presumably the defendant also con- amount to be paid, the costs are assessed by a siders that the benefit of defending the case out- specialist costs judge in a detailed examination weighs the cost. that is often more costly than the amount in dispute. Fortunately, such detailed assessment pro- In considering whether high-cost countries cedures are relatively rare. As a rule, the winning should change their ways, and the implicit criti- party usually recovers from two-thirds to three- cisms in this article’s title, one must acknowledge quarters of its total costs for the issues on which that the type of litigation currently conducted in it was successful. the specialist Patents Court of the High Court of England and Wales1 – with its rigorous procedure The winning party often seeks and is awarded an and associated expenses – appears to be attrac- immediate interim payment of a proportion (usu- tive, at least to those with complex, valuable dis- ally 50 percent) of the costs it is likely to recover. putes. The cost might also be about right. As a result, interesting information on costs 1 Patent infringement reaches the public domain through such hear- Access to justice actions in Scotland are brought in the Court of ings, though they tend to fall at the more extreme Session in Edinburgh. end of the scale. For example, Research in Motion The true test may be whether justice is accessible, (RIM) spent about £6 million on its recent litiga- not only for those aiming to enforce rights but al- tion with Visto, who by comparison "only" spent so for those seeking to defend themselves, chal- £1.6 million. Johnson & Johnson spent £3.7 mil- lenge rights or request a declaration to the effect lion compared with CIBA's costs of £2.3 million in that certain rights do not cover a product or a recent case about contact lenses, and Edwards process they wish to market. 7

Put another way, one must consider cost in con- fers the views of an experienced patent examiner, text, in relation to the quality of the dispute reso- on written application, in relation to validity lution process. Or, as Mr. Tom Sanchez of RIM said and/or infringement issues. Parties can use these at a recent conference on international patent lit- non-binding opinions to help resolve their dis- igation, "the best value for the money spent is putes without recourse to litigation. The IPO re- when the Court comes to the right answer more cently delivered its 100th opinion since launching often than not." In a cost-benefit analysis, many the service in October 2005. critics are all too keen to focus on the cost without fully considering the other half of that analy- Even were one to assume that the current patent sis – the benefit. We need to be mindful of the litigation system in the U.K. meets cost-benefit critic who knows the price of everything but the expectations for those that use it, there is no value of nothing. doubt that a significant number of cases are not litigated because of the high cost involved. This Mr. Sanchez identified some good reasons for cannot be good. It is, therefore, worthwhile to bringing a patent suit in the U.K. He observed that consider the potential benefits of a less costly litigating in the U.K. is less expensive than in some patent litigation system. other jurisdictions, such as the U.S., and may cost only a fraction of the settlement of a global litiga- Patents are a government-sponsored facet of the tion. He also pinpointed the following attributes economy, justified as providing further incentive of U.K. patent litigation: for innovation. Patent offices around the world re- timely, high-quality decisions by judges with view applications to determine which inventions strong technical backgrounds; deserve this special protection; however, their re- civil procedure rules provide that a testifying sources are limited and workloads high. While no expert has an overriding duty to assist the criticism is intended, they unavoidably do an im- court, which helps to ensure objective consid- perfect job, that being the nature of the system in eration of the issues; place. However, the system provides that if those cross-examination of experts improves the ex- imperfectly granted rights become commercially pert evidence. Experts tend to be more careful, important, there will be an opportunity to review because they will have to defend their state- whether a specific patent should have been ments before a judge; granted in the first place. trying all issues in one case (infringement and validity) helps to prevent contradictory, self- The EPO opposition procedure arguably offers serving arguments; and one level of such protection. It is simpler and less significant limitations on documentary disclosure costly than national litigation, especially given and the production of a product process descrip- that it covers all European countries in one pro- tion (PPD) save considerable time and cost. cedure. However, the fact that the procedure takes three to six years to complete is unsatisfac- Other options tory and inefficient. In the course of reform discussions, significant industry feedback was pro- It is also important to keep in mind other options for vided about situations in which not only are right resolving disputes. European countries benefit from owners hindered in enforcing their rights by the an effective customs regulation that can be called costs and risks inherent in litigation, but compa- upon in seizing shipments of infringing goods nies have taken licenses and paid considerable when they first enter the European Economic Area. royalties although they considered the underly- The threat of litigation (and its cost) also plays a ing rights invalid because the cost of challenging significant part in helping to produce commercial them was unaffordable. out-of-court resolutions to potential disputes. Changing their ways? Mediation plays an increasingly important role in helping parties to resolve their disputes without The European Commission (EC) is moving ahead resorting to litigation, and often results in com- with a proposal for a Unified Patent Litigation mercial solutions that extend beyond the right or System, under which there would be a single product in dispute. Arbitration can be used suc- Europe-wide jurisdiction for patent disputes (see cessfully in relation to global disputes, avoiding the article “A single patent court for Europe: Dream the need to litigate in several countries in parallel. or Reality?” on page 12). A pan-European court The U.K. Intellectual Property Office (IPO) has in- would potentially offer a more cost-effective and troduced a non-binding opinion service that of- efficient system for litigation. However, the quality >>> 8 FEBRUARY 2010

of the procedure and operation of the Court in This proposal would create a truly differentiated practice will ultimately determine whether the forum for litigating patents in lower cost cases. new system will indeed improve access to justice There are many points yet to be addressed, and within Europe that is cost-benefit balanced. much will depend on how the procedure is put into practice and the extent to which robust case The U.K. is examining the cost of IP litigation as management is actually applied. In that regard, part of a more general enquiry into the costs of the new system’s success will hinge on how well civil litigation. This is being undertaken by a com- judges manage and hear individual cases. The mittee headed by Lord Justice Jackson that has sole judge presiding over the PCC, The Honorable just delivered its final report at the end of a year- Judge Fysh, is due to retire in the summer of 2010. long review of civil litigation costs – including IP He will be a hard act to follow, and finding a suit- litigation. The Jackson Committee investigated able replacement for a position that offers a rela- the costs of the type of litigation already taking tively modest salary will not be easy. IP LITIGATION COSTS IP LITIGATION

One of the principal concerns of a litigant in the High Court is that costs (the claimant's as well as

Photo: UK IPO Photo: the defendant’s) are extremely difficult to predict. The reformed PCC would enable a party to com- mence litigation knowing that maximum cost exposure for the defendant would be £50,000. The simpler procedure would also enable the party to reach a sensible arrangement with its lawyers and more accurately estimate its own (perhaps even capped or fixed) costs, thus paving the way for a more reliable cost-benefit analysis. That could improve access to justice and help the system to op- The U.K. Intellectual Property Office offers a place and proposed potential reforms that could erate more efficiently and effectively, with an ap- range of services to help lead to a more cost-effective system, and sup- propriate level of quality and rigorous procedure resolve disputes ports a proposal by the Intellectual Property – certainly a good thing. including a non-binding opinion service Court Users' Committee for reforming the Patents County Court (PCC). At present, the jurisdiction Reform is critical and procedure of the PCC are identical to those of the Patents Court of the High Court. There is no The ability to challenge patents – as much as the limit on remedy and no difference in procedure, ability to enforce them – through cost-effective as a result of which costs are often identical. In and efficient litigation is a fundamental tenet of the general, the PCC is mandated to handle simpler, patent system. The EC made a similar point in the less commercially important cases, but there is no framework of its recent enquiry into the European mechanism to enforce this difference, nor is there pharmaceutical sector. The proposed EC Unified any difference in the principles based on which Patent Litigation System, the U.K.'s investigation in- costs can be recovered by the successful party. to civil litigation costs and the possible reform of the PCC are important steps in the right direction. Along with renaming the PCC the Intellectual Property County Court, a radical reform of the This author, however, fears that the U.K. system still PCC’s jurisdiction and procedure is proposed. caters only for those at the extremes – either those Damages would be limited to a maximum of litigating patents that have considerable commer- £500,000 (at present, there is no limit on jurisdic- cial importance, so-called "big ticket" litigation, at tion or remedy), and cost recovery by the winning one end or those involved in more modest, low-val- party would be capped at £50,000 (there is cur- ue disputes at the other. There seem to be a signif- rently no limit). Procedure would be radically icant number of companies caught in the middle streamlined, and parties would primarily be re- that cannot make use of either alternative. Reform quired to present their cases by sworn sequential of the court system and the provision of a cost-ef- written arguments. Judges would impose robust fective, efficient system for enforcing, and challeng- case management, and trials would be limited to ing, patents in which all interested parties have ac- one or, at most, two days. Documentary disclo- cess to justice is therefore critical to the fair sure (discovery), experiments, factual evidence, operation of the patent system. expert evidence and cross-examination would only be permitted after a cost-benefit test. 9 AN EU COMPETITION LAW PERSPECTIVE ON REVERSE PAYMENTS

The issues reviewed in this article by Sean-Paul Brankin, Counsel, Crowell & Moring, are considered in greater depth in an article by the author in the Journal of Intellectual Property Law and Practice, Volume 5, Issue 1 (Jan 2010), entitled “Patent Settlements and Competition Law: Where Is the European Commission Going?”

In the Final Report on its Pharmaceutical Sector Is the FTC right? Inquiry, the European Commission identified patent settlement agreements as a focus for Simply put, the FTC’s fundamental concern re- European Union (EU) competition law enforce- garding reverse payments is that the patent hold- ment in the industry. The Commission’s concerns er is using part of the profits from its patent mo- relate to so-called “reverse payment” settlements. nopoly to buy off competitive entry. An advisor to These are settlements involving a payment (or FTC Chairman Jon Leibowitz recently said, “As a some other value transfer) from the patent hold- matter of economics, it will generally be most er to the generic company challenging the patent. profitable if the brand and the generic firm avoid the possibility of competition and share the re- The Commission’s interest in reverse payment sulting monopoly profits.” 2 settlements has clearly been inspired by the activities of the U.S. Federal Trade Commission Such concerns may not be misplaced. In fact, the (FTC). For a number of years, the FTC has pursued issue may not be whether some reverse payment reverse payment settlements as potential in- settlements are anti-competitive, but whether the fringements of U.S. antitrust rules. Specifically, the FTC can effectively distinguish those settlements FTC argues that reverse payment settlements that are anti-competitive from those that are not. should be presumed to be unlawful if: It is not clear that the presumption of illegality the reverse payment is substantial; proposed by the FTC achieves this, or that there the generic challenger is unable to immedi- are workable alternatives available. Certainly the 1 Schering-Plough Corp. v. ately enter the market with a competing U.S. courts have not been convinced. FTC, 402 F.3d 1056 (11th Cir. 2005) cert. product; and denied, 126 S. Ct. 2929 there is no proof of any motive for the pay- There appear to be three fundamental concerns (2006); In re Tamoxifen ment other than the delay to generic entry. with the FTC’s approach in the U.S. context. The Citrate Antitrust Litig., first is that settlements are generally efficient and 466 F.3d 187 (2nd Cir. 2006); In re Ciprofloxacin However, the FTC’s position is controversial. socially beneficial. They avoid unnecessary litiga- Hydrochloride Antitrust Senior U.S. courts have, to date, consistently re- tion costs and, more important, create certainty Litig., 544 F.3d 1323 jected its approach, for example in the famous that allows parties to plan and invest for the fu- (Fed. Cir. 2008), cert. denied, 129 S. Ct. 2828 Schering-Plough Corp. v. FTC dispute, or in the ture. U.S. antitrust law recognizes these benefits (2009). Tamoxifen case.1 Instead, as in the Tamoxifen case, and, as a result, settlements are not generally con- 2 Michael Kades, courts have held that reverse payment settle- sidered to infringe antitrust rules even where they Whistling Past the Graveyard: The Problem ments are generally lawful, provided generic en- may have an adverse effect on competition (see, with Per Se Legality try is delayed only during the lifetime of the rele- for example, the aforementioned Tamoxifen case). Treatment of Pay-for- vant patent and in relation to products that The second relates to the extent to which there Delay Settlements, would infringe it. would be greater competition in the absence of a Competition Policy International, Volume 5, settlement. In other words, the counterfactual No. 2, Autumn 2009. This raises a number of questions for European analysis. Initially, for example in the Schering- lawyers. What is the FTC’s reasoning and is it Plough dispute, the FTC argued that, absent the right? How does that reasoning apply in an EU reverse payment, the parties would have reached context? And, ultimately, what approach is the a settlement involving an earlier generic entry European Commission likely to adopt? date: “[If] the patent holder makes a substantial payment to the challenger as part of the deal, >>> 10 FEBRUARY 2010

Photo: iStockphotos Photo: U.S. Court of Appeal for the 2nd Circuit explained in the Tamoxifen case: “while the strategy of paying off a generic company to drop its patent challenge would work to exclude that particular com- petitor from the market, it would have no effect on other challengers of the patent, whose incen- IP LITIGATION COSTS IP LITIGATION tive to mount a challenge would also grow com- mensurately with the chance that the patent would be held invalid.” As the Court went on to observe, although in theory it might be possible The European Commission’s interest in reverse payment settlements has to pay off all potential generic challengers, in prac- been inspired by the activities of the U.S. Federal Trade Commission (FTC). tice this is unlikely to be economically viable.

absent proof of other offsetting considerations, it On the face of it, the above three concerns ap- is logical to conclude that the quid pro quo for the pear to justify the position of the U.S. courts that payment was an agreement by the generic to de- reverse payment settlements should generally be fer entry beyond the date that represents an oth- treated as lawful. However, the FTC has a poten- erwise reasonable compromise.” This argument is, tial response to at least some of these concerns. however, problematic. As the FTC recognized in Under the Hatch-Waxman Act, the first company the Schering-Plough dispute, in some cases the to file with the U.S. Federal Drug Administration parties may not settle at all absent a reverse pay- for generic approval obtains a 180-day exclusivity ment. Indeed, the U.S. Court of Appeal for the period during which other generic companies 11th Circuit described the FTC’s counterfactual cannot enter the market. As originally drafted, the analysis in that case as “untenable.” 180-day period would begin only once the first filer launched its product. As a result, a settlement The FTC now argues that if no settlement could in which the first filer agreed to delay the launch be reached then continued litigation would “yield of its product would effectively extend the exclu- a greater prospect of competition.”3 But this is al- sivity period and exclude all third party generic so problematic. The existence of a reverse pay- entry during that time. Such a settlement is po- ment shows only that the patent holder believes tentially substantially anti-competitive. However, 3 FTC v. Cephalon, FTC there is some risk that the patent will be held in- in 2003, the Hatch-Waxman Act was amended so pleadings available at: valid or not infringed. It does not show that the that the first filer may forfeit its exclusivity period http://www.ftc.gov/os/c risk is greater than 50 percent. If the risk is less if, among others, it fails to launch its product aselist/ 0610182080213 complaint.pdf than 50 percent, then applying the balance of promptly. The FTC argues that this amendment 4 Michael Kades, Ibid. probabilities standard of proof in civil cases, the has not been effective and settlements can, in 5 Anne Layne-Farrar, counterfactual argument would be that the principle, still be used to extend the exclusivity Reversing the Trend? 4 The Possibility that Rule patent is valid and infringed. In that case, the set- period and blockade third party entry. Other Changes may Lead to tlement will have no adverse effect on competi- commentators appear to take the view that the Fewer Reverse Payments tion (unless generic entry is excluded beyond the amendment has removed the concern.5 in Pharma Settlements, Competition Policy lifetime or scope of the patent) since the patent International, Volume 5, entitles its owner to exclude the generic regard- The EU context No. 2, Autumn 2009. less of the settlement. 6 Case 65/86 Bayer v. The EU context differs from that in the U.S. in at Süllhöfer [1988] ECR 5249. The third concern relates to the extent to which least two important respects. First, EU competi- an individual settlement significantly restricts tion law contains no equivalent to the U.S. rule competition. As mentioned, if the patent is valid, a that settlements are not generally unlawful even settlement that delays generic entry within its if they may have some adverse effect on compe- scope and duration should have no anti-competi- tition. Instead, the European Court of Justice has tive impact. Importantly, the position may be sim- held that settlements should be treated in the ilar if the patent is invalid or likely to be so. As the same way as other types of agreements.6 11

Second, there is no equivalent under EU rules to claims and other relevant factors surrounding the the Hatch-Waxman Act or the 180-day exclusivity parties’ negotiations.” 9 period for the first generic challenger. As a result, the FTC’s potential response to concerns regard- This proposal raised concerns regarding the abili- ing its proposed presumption of illegality is not ty of courts or competition authorities to make available in the EU context. any assessment absent a full trial on the merits and has not been pursued in the U.S. However, Overall, therefore, while EU competition law may there is some precedent for such an approach un- seem to weigh in favor of a presumption of ille- der EU law. In assessing the compatibility of gality, the differing EU regulatory context weighs trademark delimitation agreements with EU com- against it. petition rules, the Commission has previously made its own assessment of the ability of relevant The European marks to co-exist.10 Whether an Commission’s equivalent approach is appropriate likely approach in the more technical patent context may be open to debate. Interestingly, it seems the

Commission does not, currently, Government US Federal Photo: If the Commission does go down intend to follow the FTC and apply this path, it is likely to be particular- a general presumption that re- ly interested in the internal docu- verse payment settlements are un- ments of the parties (particularly lawful. The Final Report of the the patent holder) relating to Pharmaceutical Sector Inquiry in- The U.S. Federal Circuit Court has patent validity, the assessment of held that reverse payment dicates in §763 of the Technical settlements are generally lawful, likely success in litigation and the Annex, that reverse payment set- provided generic entry is delayed settlement negotiations. If it can tlements would not be “deemed” only during the lifetime of the identify cases where such docu- relevant patent and in relation to unlawful without a full investiga- products that would infringe it. ments suggest the patent holder is tion of the facts, and the head of likely to lose the litigation and the the Inquiry Task Force recently said the purpose of the reverse payment is to avoid this, Commission “will not take the view per se that they may be tempting candidates for enforce- patent settlements are probably illegal.” 7 ment action. Interestingly, Servier’s patent in the case the Commission has announced it is investi- 7 Abigail Rubenstein, EU So what will the Commission do? First, it is likely to gating was found by the U.K. Court of Appeal to to Request Drug Patent Deal Details, Law 360, take the view that reverse payment settlements be “very plainly” invalid and “the sort of patent 19 November 2009. that delay generic entry beyond the period of which can give the patent system a bad name.” 8 In re Cardizem CD patent exclusivity or in relation to products not Antitrust Litig., 332 f.3d 896 (6th Cir. 2003), cert. covered by the patent automatically infringe com- Finally, it should not be excluded that the denied, 543 U.S. 939 petition rules. The U.S. courts do consider such set- Commission could ultimately pursue an FTC-style (2004). tlements to be per se violations of antitrust law.8 presumption of illegality. A second reverse pay- 9 Brief for U.S. as Amicus Curiae, FTC v. Schering- ment case is currently before the U.S. Court of Plough Corp., 126 S. CT. Second, the Commission may pursue an ap- Appeal in the 2nd Circuit, Arkansas Carpenters 2929 (2006) (No. 05- proach originally proposed by the U.S. Health and Welfare Fund et al. v. Bayer et al., and 273). Department of Justice (DoJ). The DoJ initially there are indications that the Court may consider 10 Case IV/C-30.128 Toltecs-Dorcet OJ L 379, strongly opposed the FTC’s presumption of ille- overturning its previous case law and adopting 1982, p. 19. gality (although, following the appointment of a the FTC approach. If this were to happen, the new head of its antitrust division by the Obama European Commission may also consider chang- administration, it now supports the FTC line). As ing its view. It is to be hoped it does not. an alternative, it suggested an assessment of reverse payment settlements based on “a limited examination into the relative merits of the patent 12 FEBRUARY 2010 A SINGLE PATENT COURT FOR EUROPE Dream or Reality?

Alejandro I. Garcia, Associate, Bird & Bird, U.K., practices law in England and Wales, New York and Chile, concentrating on international arbitration and cross-border litigation of disputes involving IP, information technology, telecommunications and complex commercial issues. In this article Mr. Garcia discusses IP LITIGATION COSTS IP LITIGATION the imminence of a single patent court for Europe.

In Ungar v Sugg (1892), These instruments enable patentees to exploit Lord Esher commented their IP rights on a global scale. Patent litigation, with unparalleled elo- however, has remained confined to the jurisdic-

Photo: iStockphotos Photo: quence on the distress tion of national courts. suffered by patentees seeking to enforce their International enforcement of patent rights may rights: “What, that a involve legal proceedings in multiple jurisdictions man had better have (and even proceedings within proceedings in his patent infringed, or some countries, such as Germany), which are have anything happen generally subject to the laws of the country to him in this world, granting the patent. The aggregate costs of en- short of losing all his forcing patent rights in multiple jurisdictions can Resolving the issue of multi-jurisdictional patent family by influenza, than have a dispute about a be enormous. A February 2009 report requested litigation would require patent.” One wonders whether Lord Esher would by the European Commission cites the average legislative action; that is have found words to describe the challenges in- legal costs parties must bear in patent litigation the approach being pursued in Europe herent in modern patent litigation, particularly in in four countries, namely, France, Germany, the since 1999. an international context. Netherlands and the U.K.2 The report estimates that, in big commercial cases, at first instance, At the time that Ungar v Sugg was decided, inter- party costs amount to €200,000 in both France national trade was based on tangible goods; as and the Netherlands, €250,000 in Germany and was the wealth of countries. National authorities €1.5 million in the U.K. Such costs often prevent granted patent rights according to the require- small and medium-sized enterprises (SMEs) from ments they deemed fit – often paying little or no enforcing their patent rights in all the jurisdic- attention to the practice in other countries. tions in which a pan-European patent infringe- Patent litigation was rare and took place in only a ment might take place. handful of countries. 1 At present, all European Various solutions to the issue of multi-jurisdic- Union (EU) countries The 20th century, particularly its last decades, saw a tional enforcement have been put forward. are EPC members, as are some non-EU fundamental shift in most economies in the world. Parties to a multi-jurisdictional patent dispute countries – such as Intellectual creations became the economic en- may conclude arbitration agreements whereby Croatia, Iceland, Norway gine of most developed countries. Developed and they agree to resolve their dispute before a single and Switzerland. 2 http://ec.europa.eu/ developing economies became interdependent. arbitral forum. In such “consolidated” cases, arbi- internal_market/indprop International trade became truly global; with the tration is often cheaper and quicker than resort- /docs/patent/studies/liti Internet no country or player is too small. The ing to litigation in several jurisdictions. The main gation_system_en.pdf patent system, to some extent, adapted to this drawback of arbitration in this respect is that it re- 3 See e.g. in the U.S. Voda v Cordis Corp, Fed Cir new reality, particularly by making it easier for in- quires the consent of all parties involved, an un- App No. 05-1238. ventors and companies to secure patent rights in likely prospect in many patent infringement cas- several countries at once. The 1970 Patent es. In theory, patentees may attempt to Cooperation Treaty (PCT) provided a single pro- “consolidate” a multi-jurisdictional case in a single cedure for filing patent applications in each of its national court. This potential solution has been Contracting States. The European Patent rejected by certain national courts3 and, in any Convention (EPC), signed in 1973, provided for a event, would bring about serious cross-border centralized patent prosecution mechanism.1 enforcement issues. 13

Unifying European patent One of the main reasons for supporting the adop- courts tion of the UPLS is economic. According to a report published on February 26, 2009, by 2013, The EPLA users of a unified European patent system would Considering the limitations of the above meas- save €148 to €289 million per year, compared to ures, it might appear that resolving the issue of the costs of piecemeal litigation.6 Such reductions multi-jurisdictional patent litigation would re- in legal costs could allow many SMEs to enforce quire legislative action. That is the approach be- their patent rights in all EU and EPC countries. ing pursued in Europe. Since 1999, an alternative agreement to the EPC that would provide for the Hurdles to adopting the creation of a unified court system has been under UPLS consideration within the framework of the European Patent Organization. Nevertheless, the UPLS has yet to overcome certain legal hurdles. In April 2009, the EU Presidency In November 2003, the Working Party on Litigation (Czech Republic), in accordance with the wishes published a draft European Patent Litigation of the majority of its member states, requested Agreement (EPLA), providing for the creation of that the European Court of Justice (ECJ) issue an such a system. But in February 2007, an interim le- opinion on the compatibility of the UPLS with the gal opinion by the European Parliament’s Legal EC Treaty.7 The ECJ would have to decide two spe- Service caused a major setback when it concluded cific issues: (a) whether an international organiza- that the EPLA touched on issues under the exclu- tion may render decisions on Community issues; sive jurisdiction of the European Community (EC) and (b) whether the patent court would be al- and, consequently, would breach, prima facie, lowed to refer issues to the ECJ (as proposed un- Article 292 of the EC Treaty. der the UPLS). It may take the ECJ up to 18 months to provide its opinion. The UPLS The European Commission has made significant The UPLS, being connected to the establishment efforts to resolve the issues arising from piece- of a Community patent, may still be hindered in meal patent litigation. In its April 2007 communi- its progress by certain concerns, particularly in re- cation entitled “Enhancing the Patent System in lation to the language(s) of legal proceedings. In Europe,” the Commission recommended creating December 2009, the Competitiveness Council a single European Patent Court whose decisions met to discuss “political issues” in relation to the concerning disputes over patents granted by the UPLS. A press release by the Swedish Ministry of EPO would have effect in all EU member states. Foreign Affairs (Sweden then held the EU Following subsequent discussions, a proposal for Presidency) claimed, “the Competitiveness the possible structure of a European Patent Court Council […] reached a unanimous agreement on was prepared in October of that year. 4 the general focus of the European patent regulation and Council conclusions on a common In late 2007 and 2008, it became clear that EU European Patent Court.”8 However, issues related 4 http://register. member states disagreed as to whether such a to the language of proceedings and translation consilium.europa.eu/pdf /en/07/st14/st14492. court would constitute an international entity or requirements were not resolved. en07.pdf an EC body. In the first half of 2009, the 5 http://www.epo.org/ Commission recommended to the European More dream than reality patents/law/legislative- initiatives/community- Council the negotiation and adoption of an agree- patent.html ment creating a Unified Patent Litigation System Although the establishment of a unified patent 6 http://ec.europa.eu/ (UPLS). A compromise solution, that system would system in Europe might seem to be near, some of internal_market/indprop/ docs/patent/studies/litig be a hybrid between an international organization the issues that caused the EPLA to fail in 2007 re- ation_system_en.pdf 5 and a full EU body. The patent court system would main. As such, it is uncertain whether piecemeal 7 http://register. have the following main features under the UPLS: patent litigation in Europe will become a thing of consilium.europa.eu/ jurisdiction over European and Community the past. For now, to the disappointment of many pdf/en/09/st09/st09076. en09.pdf patents (once granted) for infringement and patentees – who might well share Lord Esher’s 8 http://www.regeringen. revocation actions; trepidations – a single patent court for Europe is se/sb/d/12407/a/136614 decisions would have effect in all countries in more dream than reality. which the patents at issue are in force (i.e., EU and non-EU countries); and it would provide for a single judiciary composed of specialist judges, following standard- ized procedures. 14 FEBRUARY 2010 IP LITIGATION IN AFRICA

This article by Darren Olivier, Head of Brand Enforcement, Bowman Gilfillan, South Africa, highlights some of the more recent IP dispute developments across the African continent. Mr. Olivier is a co-founder of the Afro-IP blog, which publishes regular articles and updates on IP in Africa.

Africa, a continent of 54 countries, with a popula- to generate future wealth for the country. tion of around one billion, produces relatively few According to the settlement, Ethiopia will select IP LITIGATION COSTS IP LITIGATION reported cases of IP-related disputes. Apart from a the global distributors for its coffee and set the steady stream of IP decisions emanating from conditions for sale. Ethiopia charges no royalty fees South Africa, there is a dearth of information from for coffee distribution licenses but, in return, asks the rest of the continent and such information, if distributors to market each type of coffee under its and when available, tends to reach only those in particular brand name. (See “Making the Origin the know. Most IP practitioners are, therefore, un- Count: Two Coffees,” WIPO Magazine 5/2007.) aware of how IP is enforced on the continent. As a consequence, IP investment in Africa has been South Africa – Trademarks treated with some apprehension, or there has been on the front line an assumption that effective IP rights enforcement is not a prerequisite for doing business there. No less than four trademark cases reached the However, there is evidence that this is changing. Supreme Court of Appeal, South Africa’s highest commercial court, in 2009, and a significant number of other cases appeared in the law re-

Courtesy EIPO ports of the High Court. This is indicative of the Courtesy USAid ongoing healthy debate on IP issues in South Africa, where information on IP enforcement in the country has become increasingly accessible, in particular in the areas related to coun- Some 15 million people in Ethiopia depend on the coffee sector, which generates 60 percent of the country’s export earnings. terfeiting and domain names.

Online media, such as Afro-IP, World Trade Mark In 2010, the country will be hosting the FIFA Review, Managing Intellectual Property and the World Cup football tournament, whose revenues WIPO Magazine, have stepped up efforts to facili- directly depend on the country’s ability to ade- tate access to information on the IP situation in quately protect the IP rights of its official spon- Africa. The cases below are but a few of those that sors. There have already been a number of cases have recently come to light. Whether it is that of international brand owners effectively enforc- more is now known about African IP rights en- ing the ambush marketing provisions of the forcement or that its effectiveness is improving is Merchandise Marks Act 1943, as amended. (See not altogether clear. However, one thing is certain “Defending its turf: FIFA combats Ambush – that IP dispute resolution is alive and well in most Marketing,” WIPO Magazine 4/2009.) economically vibrant economies on the continent. No passing off in Ethiopia’s coffee Namibia

In an IP dispute with Starbucks over U.S. registra- The strength of Namibia’s IP system was tested tion and use of trademarks for its premium coffee recently in the passing off case of Guido-Dirk beans, Ethiopia recognized an opportunity to ne- Gonschorek and Others v Asmus and Another gotiate with the company and settled the dispute (SA 11/2007) [2008] NASC 3 (15 April 2008). The in an innovative way that may have long-term case arose after Asmus sold part of its ASCO benefits for its people. Instead of attempting to ex- branded business (car hire, panel-beating, prop- tract cash in the form of royalty payments, the set- erties and yacht chartering) to Gonschorek. tlement aimed to increase Ethiopia’s brand recog- Asmus sued successfully both on the grounds of nition and the demand for its coffee beans in a bid passing off and under the Close Corporation Act 15

26 (1988). In dismissing an ensuing appeal, the Lessons from Uganda Judge considered what was meant by an "unde- sirable name" and "calculated to cause damage" The High Court of Uganda in Anglo Fabrics in the Close Corporation Act, as well as the prin- (Bolton) Ltd and Ahmed Zziwa v African Queen Ltd ciples of passing off, when applied to the sale of and Sophy Nantongo ruled that African Queen part of a business (including its name) and the Ltd and Sophy Nantongo were infringing the purchaser’s subsequent use of that name for registered trademark “Mekako” and passing off other business purposes. their medicated soap product. The plaintiffs were granted an injunction, and the defen- Kenya – A controversial dants ordered to pay a fine. The case is inter- patent decision esting in a number of respects: Speed: The case was decided within 16 In a case that has already led to much discussion months of its being launched. in Kenya, the Industrial Property Tribunal has Transfer of ownership: The case has significant ruled that it has no jurisdiction to hear applica- implications for brand owners acquiring or tions to revoke patents granted by the African disposing of trademarks in Uganda, who may Regional Intellectual Property Organization be best advised to include a separate transfer (ARIPO). The ruling arises from an application by of ownership document – duly stamped – in Chemserve Cleaning Services Ltd to revoke their records. patent AP 773 held by Sanitam Services (EA) Ltd. Reliability: The tests for both infringement and The decision: passing off used by the Court will be familiar indicates, unsurprisingly, that the provisions of enough to common law lawyers. For example, national laws are very important when enforc- the Judge was guided by the five pointers in ing and defending rights to ARIPO-granted the English case of Reckitt & Coleman Ltd v patents; and Borden Inc (also known as the Jiff Lemon case) may provide more reasons for IP portfolio for determining passing off. managers to use the ARIPO system because of ARIPO recognition: The judge inferred that the difficulties in having certain rights re- ARIPO-registered trademarks designating Uganda voked. Filing for rights using both the local would be enforceable. and ARIPO systems may give litigators useful Costs: The Court ordered that interest be paid options. at the rate of 25 percent per annum.

An Appeal Board Turning west – Nigeria judgment at ARIPO The Nigerian Copyright Act has long provided for The Kenyan company Sanitam Services (EA) Ltd civil enforcement against copyright infringement. was again in the spotlight when it appealed However, with a slow-moving justice system and ARIPO’s decision to remove its patent AP 773 "Foot few copyright-trained attorneys, civil enforce- Operated Sanitary/Litter Bin" from the register due ment seemed to be more dream than reality. That to non-payment of annual maintenance fees. The changed in 2009 when the Musical Copyright patent was granted on October 15, 1999, but Society of Nigeria (MCSN) successfully sued maintenance fees were consistently received late. telecommunications provider Zain for copyright The Appeal Board concluded that both parties infringement, to the tune of 100 million Naira (ap- were to blame for the delays in payments as proximately US$674,000). Infringed works had ARIPO had failed to send reminders, which it been used in advertisements and sold as ring- ought to have done. Consequently, the Appeal tones. The fact that MCSN was able to obtain a Board ordered that the patent be reinstated in judgment of infringement of foreign-owned Kenya and Uganda (the appeal was dropped in re- songs is good news for international collecting spect of Botswana, Zambia and Zimbabwe). societies, as well as for Nigeria (Source: Aurelia J. Schultz, Afro-IP). ARIPO was urged to strictly respect the Harare Protocol on Patents and Industrial Designs, in particular with regard to time limits, information delivery, application procedure and processing, appeals procedure and the rules of natural justice. 16 FEBRUARY 2010 RESOLVING IP DISPUTES IN JAPAN Counting the Cost

John A. Tessensohn, Board Member and Shusaku Yamamoto, founder-owner, Shusaku Yamamoto, Japan, are co-authors of this article detailing Japan’s mechanism for the resolution of IP disputes.

Japan is known to be one of the world’s most ex- An appeal mechanism against IPHCJ decisions is IP LITIGATION COSTS IP LITIGATION pensive countries, with Osaka and Tokyo regular- available through the Supreme Court, Japan’s ly topping the rankings as the world’s priciest highest appellate court. The Supreme Court rarely cities. This high-cost perception has clouded the overturns the IPHCJ’s decisions as appeals are re- surprisingly refreshing truth that Japan is in fact a stricted to reviewing the legal reasoning behind relatively affordable and reliably expeditious IP the decision, not the facts of the case. It has the dispute resolution venue. discretion to accept or decline to review an appeal.

The dispute resolution Benrishi and bengoshi framework The Japanese IP bar consists of benrishi (patent at- Japanese IP dispute resolution currently uses a two- torneys) and bengoshi (attorneys-at-law). Japanese track system, with the Board of Appeals of the Japan patent attorneys, like their American counterparts, Patent Office (JPO) hearing invalidation appeal (IA) usually have a technical background and a legal challenges and the District Court hearing patent in- mandate to practice patent and other IP law be- fringement actions. The JPO Board of Appeals panel fore the JPO, IPHCJ and Supreme Courts. They can consists of experienced appeal examiners and re- also litigate patent infringement matters as co- views all relevant invalidation grounds. counsel with bengoshi. Most bengoshi, like Japanese judges, rarely have a science or technol- Patent infringement proceedings are heard be- ogy background; therefore, the ideal litigation fore the Osaka or Tokyo District Court, which have team for complex high technology patent matters exclusive jurisdiction over different geographical would consist of benrishi and bengoshi. 1 Naoki Koizumi and areas. Both district courts have designated IP divi- Toshiko Takenaka, “The sions, whose technical advisors (saibansho chōsa- Benrishi and bengoshi routinely charge on an Changing Role of the Patent Office and the kan) brief judges on the complex technical mat- hourly basis for invalidation and infringement Courts after Fujitsu/TI” ters often involved in patent infringement cases.1 proceedings – rates vary from US$180 to US$550. in Law in Japan: A However, fees based on economic value are com- Turning Point, 558-559 (Daniel Harrington Under Japan’s patent law, only the JPO has the ju- mon in Japan, and bengoshi customarily charge Foote, ed. 2008). risdiction to invalidate a patent, but the infringe- an initial retainer and a success (contingent) fee ment courts can decline to enforce a patent if for achieving a favorable settlement. there are grounds for invalidation. The Intellectual Property High Court of Japan (IPHCJ), the coun- The initial retainer fee is calculated on the basis of try’s specialist IP appellate court, reviews, on a de the economic value sought in the complaint, and novo basis, all JPO invalidation and District Court the success fee is based on the amount actually infringement decisions. obtained. As the amount at issue increases, the rate of fees gradually decreases. As an indication, Japan’s Dispute Resolution Framework attorney’s fees in small patent litigation should be less than US$300,000, with medium-sized patent

Invalidation Appeal Infringement Appeal litigation at around US$550,000 and larger or more complex patent litigation costing upwards of US$850,000. Board of Appeals of JPO Osaka Dist. Ct. Tokyo Dist. Ct.

Many Japanese attorneys still estimate their fees Intellectual Property High court of Japan according to the Japan Federation of Bar Associations standard for attorney’s fees that was Supreme Court 17 Photo: Wikipedia Photo:

JPO decisions can be appealed in the Intellectual Property High Court which can, in turn, have its decisions appealed in the Supreme Court, but only on points of law, so it is rather rare. abolished in 2004. Foreign clients should never- ments, as well as securing expert opinions where theless be able to negotiate billing arrangements applicable. Each party bears its own attorney’s that suit their respective circumstances. fees. Although JPO invalidation decisions conclude by ordering the losing party to bear the Even so, IP attorneys’ fees are generally lower in costs of the Appeal proceedings “under Section Japan than in the U.S., because there are no dis- 61 of the Code of Civil Procedure mutatis mutandis covery procedures or deposition practices which in Sec. 169(2) of the Patent Law,” such costs do not largely make up the high cost of U.S.2 patent liti- include the losing party’s attorney’s fees and the gation (see “U.S. Contingency Fees – A Level recoverable amount is so nominal that no one Playing field,” page 3). However, all court-filed seeks to recover them. documents must be in Japanese, meaning that foreign litigants usually incur sizeable translation Patent infringement costs for patent litigation. action

Invalidation proceedings The Japanese District Court patent infringement proceedings are not held on a single day or over Japan's mukou shimpan – invalidation appeal – several consecutive days – as is the case in most procedure came into effect on January 1, 2004, U.S. hearings. Instead, a series of hearings is usu- replacing the former opposition system. Over the ally held at one or two-month intervals until the 2 Robert Kneller, Bridging Islands: years, the JPO has worked to streamline and ex- completion of deliberations. The parties submit Venture Companies & pedite the handling of invalidation appeal pro- briefs, evidence and expert opinions at each hear- the Future of Japanese & ceedings, which are conducted on a preferential ing. Live examination of witnesses is extremely American Industry 153 (2007) (noting that the basis, using oral proceedings to expedite the ex- rare. Sometimes, the District Court may suggest a “costs of litigating amination process. According to the JPO Annual court-mediated settlement, but if mediation is in- patent infringement in Report 2009, the average IP deliberation period in conclusive, the infringement deliberations re- Japan are lower than in 2008 was an astonishingly quick 9.5 months, sume. If an infringement liability is found, the the USA perhaps by a factor of five.”). down 2.5 months from the average in 1998 which Courts will request briefings and accounting ex- 3 Standards for was already a respectable 12 months. pert reports for damage assessment. calculating the amount are available from the Intellectual Property Given the swiftness of the JPO’s invalidation pro- The plaintiff must pay an official filing fee to the Division of the Tokyo ceedings, coupled with its familiarity and experi- District Court, calculated as a percentage of the District Court at ence with enablement, completion or obvious- economic value of the case. For example, if the www.courts.go.jp/tokyo/ saiban/tetuzuki/ip/index. ness analysis of complex technologies, such as amount at issue is US$1,000,000, the official filing html biotechnology and information technology, the fee will be about US$4,000, and if the value is 4 Peter Ganea and Sadao JPO is the invalidation forum of choice in IP dis- US$10,000,000, the filing fee will be about Nagaoka, Japan in pute resolution matters. US$30,000. The economic value of a patent litiga- Intellectual Property in Japan, 148 (Paul tion case generally consists of the cost of pro- Goldstein and Joseph The average cost of preparing and prosecuting an hibiting future infringement3 plus the amount of Straus, eds. 2009). invalidation appeal before the JPO is from damages claimed. US$25,000 to US$120,000 – but may be more depending on the complexity of the case. The costs The average pendency period of first instance IP cover drafting of briefs, translation of references lawsuits was more than halved – from 31.1 months and other documents and preparation of experi- to 12.5 months – between 1996 and 2006.4 >>> 18 FEBRUARY 2010

District Court – would need to initiate a separate invalidation ap- Attorney’s fees awards peal proceeding based on novelty at the JPO.

Each party generally bears its own costs in patent Each party bears its own costs for IPHCJ appellate infringement actions, but courts have the discre- proceedings, and attorney’s fees can range from IP LITIGATION COSTS IP LITIGATION tion to order the losing party to pay costs to the US$75,000 to US$250,000 (or more) depending winner. But a successful litigant is unlikely to re- on the complexity of the case – complex cases cover all or even a substantial portion of its attor- sometimes last longer than the average eight- ney’s fees. Judges assess the costs after either par- month pendency period. ty makes a petition to fix the amount of costs. Stamp fees, including the official filing fee, and Supreme Court Appeal other costs allowed under the rules of the court Costs could be covered, but not the actual attorney’s fees borne by the parties. The IPHCJ decision can be further appealed to the Supreme Court of Japan but such cases are In patent and other IP right cases, the plaintiff can very rare and limited to points of law. The esti- add a certain portion of the attorney’s fees as part mated cost of preparing a petition to the of the damages suffered. In practice, courts usual- Supreme Court depends on the case’s complexity ly allow up to 10 percent of damages to cover at- (and ranges from US$5,000 to US$25,000). If the torney’s fees, and they consider factors such as Supreme Court accepts to hear the appeal, the the degree of difficulty of the case, total damages cost of briefing and attending the hearing could awarded, file history and conduct of the litigation. be between US$15,000 and US$25,000 (again depending on complexity). IPHCJ appeals Conclusion Either party, dissatisfied with a JPO or District Court decision, can appeal to the IPHCJ. Today’s technology-centric, globalized economy Proceedings in the IPHCJ are similar to those in provides many opportunities for right holders to the District Court. In 2008, the average pendency maximize the value of their IP portfolios through period for IPHCJ proceedings was 7.7 months.5 enforcement and licensing activities that could have a significant impact on competitors. The IPHCJ may convene a technical presentation, Competitive imperatives give potential defen- during which the parties may use multimedia dants and licensees an incentive to challenge aids to explain the technology concerned in the such asserted patent and other IP rights interna- patent dispute. As in the district courts, the IPHCJ tionally. Given the rapidity of resolution of IP in- judge is briefed by technical advisors. validation (9.5 months at the JPO) and infringement (13.7 months in first instance courts) During the appeals of both infringement and JPO proceedings and the relative affordability of con- decisions, the IPHCJ gives litigants wide latitude tentious IP proceedings, Japan is an extremely to introduce new evidence, but not new issues, to compelling and attractive market for IP dispute 5 Administrative Bureau support issues previously pleaded. This can in- resolution. of Supreme Court of clude new expert opinions, experimental results, Japan statistics at www.ip.courts.go.jp/eng/ references and any other evidence, provided that Litigants in Japan can count on reasonable costs documents/statistics.html it does not change the gist of the issues previ- for protecting their IP in the world’s second- ously pleaded. For example, if obviousness was largest free-market economy. Japan’s cost-friend- argued in the original JPO invalidation proceed- ly and expeditious IP dispute resolution system ing, it is possible to introduce new obviousness should therefore play a central role in any global, prior art references to the IPHCJ. It is not permis- IP-centered business strategy. sible to introduce a novelty argument and/or pri- or art reference at this stage: the challenger 19 A COST-EFFECTIVE ALTERNATIVE

The growing number of international IP trans- The WIPO Arbitration actions has substantially changed the ways in and Mediation Center which cross-border disputes are resolved worldwide. Due to the significant length, Established in 1994, the WIPO Arbitration costs and complexity of IP court litigation, and Mediation Center (the WIPO Center) of- parties increasingly employ alternative dis- fers ADR options for the resolution of inter- pute resolution (ADR) mechanisms, often national commercial disputes between pri- seen as more efficient. vate parties. The WIPO Center is recognized as an international and neutral forum espe- As portrayed in the previous articles in this WIPO cially appropriate for cross-border and Magazine, IP litigation before national courts can cross-cultural disputes. It has developed undeniably be very expensive and lengthy. The different types of ADR procedures that are table1 below describes the average length and conducted under the WIPO Mediation, costs of patent litigation in various jurisdictions. Expedited Arbitration, Arbitration and Expert Determination Rules (WIPO Rules).

Country Characteristics of Legal System Average Duration Average Cost - Civil law First Instance: 18-24 months €80,000-150,000 (1st Inst.) France - Unified litigation Appeal: 18-24 months - No specialized courts - Civil law First Instance: 12 months €50,000 (1st Inst.) Germany - Bifurcated litigation Appeal: 15-18 months €70,000 (App.) - Specialized court for invalidity - Civil law First Instance: few months - €50,000-150,000 (1st Inst.) Italy - Unified litigation 24 months €30,000-70,000 (App.) - Specialized courts Appeal: 18-24 months - Civil law First Instance: 12 months €100,000 (1st Inst.) Spain - Unified litigation Appeal: 12-18 months €50,000 (2nd Inst.) 1 This table has been - Commercial courts developed by the WIPO Arbitration and - Common law First Instance: 12 months €750,000-1,500,000 (1st Inst.) Mediation Center, U.K. - Unified litigation Court of Appeal: 12 months €150,000-1,500,000 (App.) based on figures - Specialized courts House of Lords: 24 months €150,000-1,500,000 (House of provided in “Patent - Mediation promoted Lords) Litigation, Jurisdictional Comparisons, The - Civil law First Instance: 6 months (in law) US$150,000 (1st Inst.) European Lawyer Ltd, China - Bifurcated litigation Appeal: 3 months, no limit US$50,000 (App.) London 2006”, as well - Specialized courts when foreigners litigate as the insights and experience of patent - Civil law First Instance: 14 months US$300,000 (1st Inst.) practitioners in Japan - Bifurcated litigation Appeal: 9 months US$100,000 (App.) particular jurisdictions. - Specialized courts It provides an indication of the - Common law First Instance: up to 24 months Up to US$4,000,000 (1st Inst.) average duration and U.S. - Unified litigation Appeal: 12 + months US$150,000-250,000 (App.) cost of patent litigation - Specialized court in those jurisdictions. of appeals (CAFC) - Jury trial available - Mediation promoted >>> 20 FEBRUARY 2010

The WIPO Rules contain specific provisions partic- by patents registered in several jurisdictions, in- ularly suitable for IP, technology and entertain- stead of filing multiple costly court proceedings ment disputes, such as those concerning confi- in all relevant jurisdictions. Other benefits of ADR dentiality and technical evidence. The WIPO include flexibility, neutrality, finality, confidentiality IP LITIGATION COSTS IP LITIGATION Center makes available, in different languages, and, very importantly, the expertise of the neutral. model clauses and agreements that parties may use as a basis for submitting disputes to WIPO. WIPO Mediation Mediation is an informal procedure in which a Experience has shown that the neutral intermediary, the mediator, assists the effectiveness of ADR depends parties in reaching a dispute settlement by facili-

Photo: iStockphotos Photo: largely on the quality of the me- tating dialogue and helping the parties to identi- diator, arbitrator or expert. The fy their interests. Unlike an arbitrator or judge, the WIPO Center maintains a data- mediator does not render a decision on the mer- base of over 1,500 qualified its of the dispute. Settlements in mediation pro- neutrals from 70 countries with ceedings are reflected in an enforceable contract further candidates added ac- between the parties. The effectiveness of ADR cording to case needs. The candidates on the WIPO depends largely on the quality of the mediator, List of Neutrals range from seasoned dispute reso- Because of its less adversarial nature, mediation is arbitrator or expert. The lution generalists to highly specialized practition- an efficient and cost-effective means of dispute WIPO Center maintains a database of over 1,500 ers and experts in the different areas of IP. The settlement. It allows parties to explore workable qualified neutrals from WIPO Center assists parties in the appointment of and interest-based solutions, to determine the 70 countries. neutrals so that each procedure under the WIPO outcome of the procedure according to their Rules is decided by neutrals who share the Center’s business needs, and to preserve the relationship commitment to time and cost-effectiveness. in the long term.

The WIPO Center operates on a non-profit basis. There are two sets of fees for WIPO mediation pro- Fees for ADR procedures – payable to the Center cedures. First, the WIPO Center’s administration and the mediator, arbitrator or expert – are calcu- fee, which amounts to 0.10 percent of the value in lated in accordance with a schedule of fees based dispute, up to a maximum of US$10,000 where on the amount in dispute and in consultation that amount is US$10 million or more. Where no with the parties and neutrals. The Center believes disputed amount is indicated, as in most cases, effective dispute resolution must be affordable the administration fee is US$1,000. Second, the and is committed to providing ADR mechanisms mediator’s fees, which are negotiated at the time that save time and costs. the mediator is appointed. Those fees are usually calculated on an hourly or daily basis, at a rate tak- ADR procedures offered ing into account the circumstances of the dispute, by the WIPO Center such as its complexity and economic importance, as well as the experience of the mediator. The ADR allows parties to solve their disputes outside WIPO Center takes an active role in negotiating of court with the assistance of a qualified neutral reasonable mediator fees. The Schedule of Fees for intermediary of their choice. It affords parties the the WIPO Mediation Rules sets out indicative opportunity to exercise greater control over the hourly and daily rates for mediators’ fees. Based on way the dispute is resolved than would be possi- the Center’s experience, WIPO mediation costs av- ble in court litigation. This increased autonomy erage between US$6,000 and US$60,000. can result in a faster process and cost savings, as parties are free to choose the most efficient pro- Mediation proceedings are often settled rapidly cedure for their dispute. For instance, they can re- and therefore minimize the cost exposure nor- solve globally – through a single procedure – dis- mally associated with dispute resolution. In WIPO putes relating to the same technology protected mediation, 73 percent of cases have settled with- 21

WIPO Mediation of a Trademark Coexistence Dispute

A North American company requested mediation in a dispute with two Italian companies and one Spanish company, based on a mediation agreement the parties had reached under the WIPO Mediation Rules. The goal of mediation was to help the parties avoid confusion and misappropriation of their similar trademarks and to regulate future use of the marks.

The Center proposed potential mediators with specific expertise in European trademark law and fluency in English and Italian. The parties selected an Italian mediator with a trademark practice. The mediator conducted an initial telephone conference with the parties’ lawyers, during which he set the timing of mediation and agreed on the procedure.

Two months later, the mediator met with the parties in a two-day session in Milan. The meeting was held in joint session with the exception of two brief caucuses. At the end of the second day the parties – with the assistance of the mediator – drafted and signed a settlement agreement covering all pending issues in dispute. The total cost of mediation amounted to US$15,000. in one to seven months, including some very Statistics show that 82 percent of the costs in- complex patent and information technology dis- volved in arbitration relate to the parties’ lawyers putes. Most settlements occur during the media- fees and expenses in connection with the presen- tion phase, consistent with the parties’ intent in tation of their case.2 If well managed, arbitration using that mechanism and with the role of the can save the parties time and money. One option mediator, although a certain number of WIPO is to use the WIPO Expedited Arbitration Rules. cases also settle after completion of the media- WIPO Expedited Arbitration provides for a sole ar- tion. By enabling the parties to identify their in- bitrator and is carried out in a shortened time terests and better understand the dispute, medi- frame at reduced cost. The time limits that apply ation can provide a sound basis for direct to the various stages of arbitral proceedings are negotiation between the parties after mediation. shorter and the fees lower than those related to arbitration conducted under the WIPO Arbitration In light of the undeniable advantages of media- Rules (as shown in the WIPO Arbitration Schedule tion and the comparatively low costs involved, a of Fees available at www.wipo.int/amc/en/arbitra- number of disputes pending before national tion/ fees/index.html). courts are being referred to WIPO mediation in order to increase the chances of settlement. Limiting the amount of evidence parties may produce during arbitration also helps to reduce the WIPO Arbitration and Expedited Arbitration duration of arbitration proceedings and related Arbitration is a private procedure in which parties costs. In a recent case, a U.S. company that sup- submit a dispute to one or more chosen arbitra- plies data processing software and services com- tors for a formal decision based on the parties’ menced a WIPO expedited arbitration proceeding 2 “Techniques for rights and obligations. The award rendered is final against an Asian bank, claiming infringement of Controlling Time and and enforceable internationally under the 1958 an agreement regarding the provision of account Costs in Arbitration”, New York Convention on the Recognition and processing services. The contract between the Report from the ICC Enforcement of Foreign Arbitral Awards. Unlike parties included a WIPO Expedited Arbitration Commission on Arbitration available at court decisions, which can generally be contest- clause, indicating that New York would be the www.iccwbo.org/upload ed through one or more rounds of litigation, arbi- place of arbitration, and that no discovery would edFiles/TimeCost_E.pdf tral awards are not normally subject to appeal be permitted. The parties agreed upon a sole ar- and can therefore result in time and cost savings. bitrator who held a two-day hearing. The parties and arbitrator agreed to use the WIPO Center’s The cost-effectiveness of arbitration proceedings electronic case communication facility “WIPO depends largely on the quality of the arbitration ECAF,” which allows for secure filing, storing and clause and how the procedure is conducted. retrieval of case-related submissions in an elec- >>> 22 FEBRUARY 2010

Mediation for Film and Media Expedited Arbitration for Film and Media

Request for Mediation Request for Arbitration and Statement of Claim

Appointment of the Mediator Appointment of the Arbitrator IP LITIGATION COSTS IP LITIGATION Parties have 7 days to agree on Parties have 7 days to agree on the person of the Mediator the person of the Arbitrator Answer to Request for Arbitration and List provided by the Center List provided by the Center Statement of Defense (20 days) Return of the list within 7 Return of the list within days 7 days

Appointment of the Mediator Appointment of the Arbitrator by the by the Center Center

Mediation Session Hearing (maximum 3 days)

Settlement of the Dispute Closure of Proceedings (3 months)

Final Award (1 month)

tronic docket.3 Three months after the request for Expedited Arbitration Rules for AGICOA – a proce- expedited arbitration, the arbitrator rendered a fi- dure for certain audiovisual disputes – tailored to nal award finding partial infringement of the the specific needs of AGICOA right holders.4 agreement and granting damages to the U.S. company. The total costs of this expedited arbi- More recently, the WIPO Center launched the WIPO tration amounted to approximately US$50,000. Mediation and Expedited Arbitration Rules for Film and Media, specifically tailored to resolve potential Another cost-effective dispute resolution option disputes in the film and media sectors, such as is to use escalation clauses that provide for a first those arising out of co-production, distribution, phase of mediation followed by arbitration or ex- broadcasting, copyright, music synchronization, pedited arbitration, or to use mediation at differ- artist and talent or new media agreements. For ent stages of arbitration in order to maximize the such disputes, the Center’s administration fee and chance of settlement. Parties to WIPO proceed- mediators’ and arbitrators’ fees have been reduced ings have elected to use escalation clauses in 20 in order to adapt them to the typical features of the percent of cases. disputes in the relevant sectors.

3 For more information WIPO Arbitration cases cover a broad range of As shown in the above diagrams, the WIPO on WIPO ECAF, see: www.wipo.int/amc/en/e disputes, including complex patent licenses, Mediation and Expedited Arbitration Rules for caf/index.html trademark and IT disputes. The amounts claimed Film and Media provide for a mediation proce- 4 See “Collective range from the thousands to millions of dollars. dure and expedited arbitration procedure that Management of WIPO Arbitration proceedings generally last from can either be combined or used independently at Audiovisual Works,” WIPO Magazine 5/2009 3 to 14 months. the parties’ discretion. These rules take into account the specific needs of those in the media Other tailored ADR procedures and film sectors seeking an expedited procedure. In addition to administering disputes under stan- The time limits in the WIPO Arbitration Rules that dard WIPO mediation and arbitration procedures, apply to the various stages of the proceedings are the WIPO Center develops tailor-made dispute res- shorter in order to expedite the chosen dispute olution procedures for specific types of recurrent IP resolution mechanism. disputes. For example, the Center developed WIPO 23 KEEP IT CHEAP TEN TIPS FOR MINIMIZING IP DISPUTE SETTLEMENT COSTS

IPKat blogmeister Jeremy Phillips is once again contributing a list of top ten recommendations to the WIPO Magazine. Last time his advice was for businesses trying to use their IP to attract financing (see “IP Financing: the Ten Commandments” in issue 5/2008), this time he advises on how to save money in IP disputes.

Some things are so obvious they are easily over- ching truth that emerged came from readers of looked. One of them is the contrast between IP common and civil law backgrounds and from laws and the rules that govern the resolution of both developing and developed economies – disputes involving IP rights. that is, that anyone contemplating IP litigation, arbitration or another form of dispute resolution For more than a century, nations have worked to should think carefully before they act. The word harmonize their IP laws, making IP law one of the “carefully” is mine. I was initially skeptical as to biggest and longest-lasting areas of cooperation whether careful thought would help to reduce between countries and resulting in national laws dispute settlement costs, as it could encourage that give citizens and businesses of other coun- would-be disputants to bring proceedings they tries the same rights and benefits as they accord otherwise might not have. However, on the basis to their own. In contrast, every country in the that careful analysis (i) might persuade disputants world has a dispute resolution system that re- to drop a claim not worth bringing and (ii) might flects its culture, historical roots and political ide- more easily result in an early and satisfactory con- ology. Those national characteristics are deep- sensual settlement thus cutting out courts or oth- rooted, often cherished and tenaciously er arbitral costs, it deserved to be included. defended whenever talk of reform is in the air. Consequently, while IP rights are increasingly The 10 tips comparable the world over, the cost and effectiveness of their enforcement reflect each nation’s Here, then, are my 10 tips for minimizing IP dis- economic and cultural DNA. pute settlement costs everywhere – or almost everywhere: The quest for global truths 1. Think carefully before entering an IP dispute. This is not merely for the reasons given above, but This contrast raises the question: if IP enforce- because some IP disputes can be solved more ment mechanisms and costs are different every- cheaply or easily by treating them as business where, is it possible to point to any general truths problems rather than as legal ones. For example, that hold universally, and that can be applied in in the case of lookalike products or packaging, a the litigation-happy U.S. and court-shy Japan, in business that has few or weak IP rights might find industrial economies such as Germany and in de- it cheaper to redesign its own product around veloping nations where enforcement of rights stronger IP rights and use that as the basis of a re- and the protection of legitimate interests may be launch rather than press ahead with expensive lit- viewed as a matter for tribal loyalties and local igation of which the outcome is highly uncertain. custom rather than – or as well as – the remote application of arbitrary rules? 2. Identify the best and worst possible outcomes of the dispute. If even the best outcome will not Before answering this question myself, I sought get an IP owner what it wants or if the worst pos- the advice of readers of my weblog, who are sible outcome is intolerable, the IP owner should drawn from nearly 150 countries. The one overar- hesitate before committing to a dispute. >>> 24 FEBRUARY 2010

3. Keep accurate, up-to-date and accessible busi- to make its own informed decision as to how to ness records. Small and medium-sized businesses proceed. It is unfair for a business to ask a lawyer are often poor record-keepers, and this can add to decide whether or not it is worthwhile to con- to the expense and inconvenience of IP dispute tinue with a legal dispute. That is fundamentally a resolution in many ways. For example, in disputes business decision, just as choosing a new com- with a former employee over IP that a business puter system is a business decision. A lawyer in IP LITIGATION COSTS IP LITIGATION claims for itself, it is imperative to have at hand private practice would not have the same infor- copies of the employment contract and miscella- mation or knowledge as does the client regarding neous instructions, memos or e-mails amending its the potential consequences of such a decision, terms or the employee’s duties. Likewise, in an in- including the repercussions for the client’s share- fringement claim relating to damages for loss of holders, employees, suppliers and distributors. profits, it is a rare judge or arbitrator who will order Also, legal representatives will be aware that they payment of a sum in the absence of evidential are open to being accused of recommending guidance as to what those profits might have that the client sue merely out of self-interest. been. Also, where works are commissioned from independent designers, software writers or the 6. Talk to your representative about likely and like, has a document recording an assignment actual cost. “How much will this cost me?” is not been executed? If so, in whose cupboard is it hid- a question that can usually be answered accu- den? The cost of finding one’s own evidence, in rately in advance of a dispute, particularly if the terms of stress and disruption to the workplace if losing party appeals or the IP owner is faced not in actual financial terms, cannot be ignored. with counterclaims and attacks on the validity of its IP rights. That said, it is important to ask 4. Seek specialist what the likely costs will be and what might advice. Specialist happen in cases where the losing party pays IP professionals are some or all of the winner’s costs. The final Photo: iStockphotos Photo: not available every- amount is not the only issue: timing is everywhere, but a legal thing for any business that watches its cash- representative fa- flow. Do I pay up front or later? Can I have regu- miliar with copy- lar statements of the expense incurred and clear right, trademark or and timely warnings whenever actual costs patent law should jump above the estimated budget? be better able to give advice based 7. Remember that your IP representatives are not on experience than a clerical service. Not everything that lawyers and Save money by one who is not. To IP attorneys do can be described as a legal serv- photocopying and many laypersons, a lawyer is a lawyer, and it doesn’t ice. There is a lot of routine activity that goes on, bundling documents to matter what sort of lawyer they get. But that is not such as photocopying and bundling documents be sent to other participants in the the thinking vis-à-vis other professions: a gynecol- to be sent to other participants in the dispute as dispute. ogist and a brain surgeon may both be medically well as judges, arbitrators or mediators. It is more qualified, but rarely would a patient consider the expensive for law firms to do this than for the one to be an acceptable substitute for the other. client to do it properly itself, and a lot of money Additionally, while IP specialists may charge high- can be saved this way (it was once unkindly re- er rates, the cost of obtaining their advice may be marked of a law firm that its photocopiers earned lower in the long term than if one were to consult more revenue in a year than one of its lawyers). a general legal practitioner who charged less but Likewise, lawyers are not a postal service, storage took longer. facility or secretarial back-up system for their clients. So remember to ask what you can do 5. Keep control of the decision-making process. yourself rather than having your representative A good professional representative will give clear, do it more expensively. comprehensible advice but leave it to the client 25

8. Watch the calendar, watch the clock. Almost as 10. Don’t turn a business dispute into a matter of inevitable as rain and sunshine is the phenome- principle. Courts almost everywhere bear silent non of the missed deadline. Disputants fail to file testimony to the phenomenon of a dispute pur- responses, evidence, fees or other vital items sued beyond the boundaries of business reason within the period laid down by and good commercial sense by law and then have to apply to a litigant who sues or defends the tribunal to have their plea an action “as a matter of princi-

or right reinstated. This costs McDonald's Photo: ple,” “to teach the other side a money and is an unnecessary lesson,” “as a point of honor” or expenditure, even when it suc- for another such motive. This is ceeds. Litigants sometimes often a consequence of one blame their legal representa- party perceiving its treatment tives for not meeting deadlines by the other as based on some for them, while representatives form of malice or personal often complain that clients slight. Little is gained from such have “left everything until the suits in terms of genuine gratifi- last minute,” which is some- cation by the time the party times too late – particularly that has thus acted comes to where no account is taken of McDonald’s clearly-stated, identifiable pay its bills. It is wiser to choose and consistently-enforced IP policy has public holidays, staff illnesses reduced their litigation spending. the path of dignity. Treat each or the mechanical failure of dispute as a business matter, faxes and computers. The forward-planning IP and keep it as far as possible from the slippery disputant can enter relevant deadlines into its di- slope of insults, invective or unsubstantiated alle- ary twice, once on the day itself and once a few gations of impropriety – the fuel that fires such working days earlier, with a reminder to check futile action. with the legal representative that the deadline has been met. Ten – or more?

9. Act in a firm, consistent manner. Where a dis- Good practice in IP dispute cost management pute arises, one side having a clearly-stated, does not consist of ticking each box and then identifiable and consistent policy often enables moving on to the next issue, but of re-evaluating the other side to take an early decision as to one’s position. Factors that emerge after a dispute whether, and to what end, it is worth persisting breaks out – such as the addition of further parties, with the dispute or better to settle sooner and at the applicability of new laws or the reinterpreta- less expense. Examples of clearly and consistent- tion of old ones, and the insolvency of a disputant ly applied dispute resolution policies may be or its merger with another entity – may make it found in the enforcement activities of critical to revisit the suggestions listed above. McDonald’s – in relation to its fast-food services and products in nearly 120 countries – and those The 10 items here are the author’s personal selec- of the easy Group whose brands, prefaced with tion. Readers may have favorites of their own the word “easy-”, are found in some 60 countries. (whether generally applicable or focused on par- While these businesses’ vigorous pursuit of their ticular countries or types of dispute resolution). enforcement policies has met with some criti- Since the cost of litigating IP will continue to trou- cism and unfavorable media publicity, there is no ble both IP owners and those with whom they are doubt that their deterrent effect has reduced not in dispute, one can never have too many helpful only their own litigation spending but that of tips. It would be good to see more of them in a others who might otherwise wish to contest IP subsequent issue of the WIPO Magazine. issues with them. 26 FEBRUARY 2010 INTRODUCING THE NEW TOP MANAGEMENT TEAM

WIPO welcomed its new top management team on December 1, 2009, when the four Deputy Directors General and three Assistant Directors General took up their appointments following the completion of the term of the outgoing team. The appointments, which include three WIPO insiders and four newcom- ers to the Organization, were approved by WIPO’s Member States at the Coordination Committee meeting in June 2009, on the basis of proposals submitted by Director General Francis Gurry.

The seven Deputy and Assistant Directors General, together with the Executive Director of the Office of the Director General (Chief of Staff), formally comprise the Senior Management Team of the Organization. The Team is responsible for assisting the Director General in providing the strategic direction of WIPO’s programs, managing the budgets, activities and human and financial resources of their respective Sectors in accordance with agreed work plans, and ensuring delivery of results in line with the Organization’s nine strategic goals.

Mr. Geoffrey Onyeama, Mr. Onyeama notes that most developing coun- Deputy Director General, tries now have modern IP laws, functional IP of- Cooperation for Development fices, respected research institutions and dy- namic creative industries. And all have a wealth Mr. Onyeama (Nigeria) has had a of resourceful entrepreneurs, inventive minds, 24-year career at WIPO. He joined traditional knowledge, biodiversity, cultural ex- in 1985, was appointed Director of pressions, imaginative designers and diverse

Photo: WIPO/Migliore Photo: the Cooperation for Development agricultural products. Thus, he believes, the ele- Bureau for Africa in 1999, then ments exist for policymakers in developing Assistant Director General respon- countries to develop strategies and policies that sible for the Coordination Sector use IP as a means of achieving real economic, for External Relations, Industry, technological and cultural growth for their Communications and Public countries. “Developing countries,” he observed, Outreach in December 2006. Prior “have seen how the strategic use of intellectual to joining WIPO, he worked for the property has contributed to the spectacular Nigerian Law Reform Commission, and prac- economic growth of countries with little or no ticed as a solicitor and advocate of the Supreme natural resources. They have the capacity and Court of Nigeria. will to achieve the same.”

Mr. Onyeama assumes responsibility for the Under the strategic goal of “facilitating the use Cooperation for Development Sector. This of IP for development,” Mr. Onyeama describes now incorporates WIPO’s programs on the main challenges as partnering effectively Development Agenda Coordination; coopera- with developing countries to design IP policies tion with African, Arab, Asia and the Pacific, and strategic plans that provide a coherent Latin America and the Caribbean countries; framework for WIPO’s cooperation with the least developed countries (LDCs); and the countries; and, within that framework, elabo- WIPO Academy. The Sector’s key objective is to rating and executing projects with clear time- facilitate greater participation by developing lines and concrete, measurable deliverables countries and LDCs in the benefits of innova- which address, meaningfully, the development tion and the knowledge economy. goals of the countries. 27

Mr. James Pooley, Ms. Binying Wang, Deputy Director Deputy Director General, Photo: WIPO Photo: Photo: WIPO Photo: General, Patents Trademarks, Industrial Designs and Geographical Indications Mr. Pooley (U.S.) brings to WIPO extensive expe- Ms. Wang (China) joined WIPO in rience as an IP practi- 1992 in the Cooperation for tioner in the private sec- Development Bureau for Asia tor. He started his legal and the Pacific, and held senior career in 1973 in positions in the Office of the California, just as Silicon Director General, prior to her ap- Valley began to attract high-tech innovators and pointment as Assistant Director General in entrepreneurs, and was a partner at Morrison & December 2006. Before joining WIPO, Ms. Wang Foerster LLP before his appointment at WIPO. He served in a number of government posts in has also been very active in teaching and writing, China, and headed the China Trademark and in chairing/participating in many profession- Service, then under the State Administration al associations and commissions, including the for Industry and Commerce (SAIC). American Intellectual Property Law Association (AIPLA), the National Inventors Hall of Fame and Ms. Wang assumes responsibility for the the National Academies of Science Committee on Trademarks, Industrial Designs and Geographical IP Rights. Involvement in boy scouting has also Indications Sector. Along with supporting the been a lifelong personal pursuit. work of Member States in the Standing Committee on the Law of Trademarks, Industrial Mr. Pooley is responsible for the Patents Sector, Designs and Geographical Indications (SCT), the which covers WIPO’s programs on patent law – in- Sector administers the Madrid System for cluding support for the work of the Standing International Trademark Registrations; the Hague Committee on the Law of Patents (SCP) – as well System for International Design Registrations; and as the administration of the Patent Cooperation the Lisbon System for International Registrations Treaty (PCT), which employs 33 percent of the of Appellations of Origin. staff of the Organization and generates some 73 percent of its income. “The challenge is to further improve the operation of the three registration systems” ex- Mr. Pooley describes his priorities as ensuring the plained Ms. Wang, “so stakeholders receive effi- continued improvement and expansion of the cient, cost-effective, user-friendly and easy to PCT, to the benefit of all of its users, as well as pro- operate services with quality-controls.” She not- viding full support to Member States in their con- ed that the Sector will also continue to work in tinued search for a balanced and productive way close collaboration with the SCT, which will be forward in norm-setting. He hopes to achieve addressing a number of topical issues. >>> these goals by emphasizing service and outreach to the PCT user community (including the completion of some exciting initiatives already under- way); and by encouraging continued trust-building within the SCP. “Progress in the SCP will follow as respectful discussion helps to reveal important areas of common interest,” he explained. 28 FEBRUARY 2010

Mr. Johannes Christian Wichard, lowed a successful career of over 40 years in Deputy Director General, telecommunications engineering and manage- Global Issues ment in the British multinational corporation Cable Photo: WIPO/Migliore Photo: & Wireless. He played a key role in the telecommu- Mr. Wichard (Germany) previously nications liberalization negotiations with govern- served as deputy director general for ments, both in Barbados and the Organisation for commercial and economic law in the Eastern Caribbean States. German Federal Ministry of Justice, where he was responsible for all as- Mr. Clarke leads WIPO’s diverse activities in the pects of the government’s IP policy. complex field of copyright and related rights, From 1998 to 2006, he worked at which range from supporting the normative WIPO in the Industrial Property Law Division and the work of Member States in the Standing WIPO Arbitration and Mediation Center. Committee on Copyright and Related Rights (SCCR) to capacity-building, awareness-raising Mr. Wichard will head the newly-created Sector for and infrastructure-related activities. Global Issues. This sector brings together a number of programs that address horizontal, cross-cut- Mr. Clarke describes his key priority as assisting ting issues, notably: Traditional Knowledge (TK), the Director General in “building an Organization Traditional Cultural Expressions (TCEs) and which is better positioned to address the multiple Genetic Resources (GR); Arbitration, Mediation challenges to the functioning of the international and Domain Names; Cooperation with Certain intellectual property system in the rapidly evolv- Countries in Europe and Asia; Economics and ing global environment.” In this regard, he consid- Statistics; Small and Medium-sized Enterprises ers the contribution of WIPO’s work on copyright (SMEs); Building Respect for IP; the new program and related rights to be critical. He highlights the on IP and Global Challenges; Communications; management challenge of meeting the expecta- and External Relations. tions of Member States at a time of increasing demands on WIPO’s resources and reduced income. For Mr. Wichard, the overarching challenge for his Those expectations include building on the nor- Sector is to re-establish WIPO’s position as the lead- mative foundation to ensure that the ing intergovernmental forum for international IP pol- Organization maintains its leading role as the icy. He describes how all the programs under the world authority on copyright; adopting creative Global Issues Sector can be highly instrumental in approaches to meet the current demands of achieving this goal, for example, by facilitating nego- Member States; and charting WIPO's role in the tiations on the development of a legal instrument for shifting sands of copyright in the digital future. the protection of TK, TCEs and GR; by contributing objective information about the economic aspects Mr. Ambi Sundaram, of IP protection; by interacting more efficiently with Assistant Director other intergovernmental organizations and with General, Administration non-governmental organizations; and by engaging and Management WIPO/Migliore Photo: actively in debates on the major challenges facing humankind, such as economic development, climate Mr. Sundaram (Sri change, public health and food security. Lanka) brings to WIPO more than 30 years of Mr. Trevor C. Clarke, experience and expert- Assistant Director General, ise in public administra- Copyright tion and management.

Photo: WIPO/Migliore Photo: He previously directed the Department of Mr. Clarke (Barbados) comes to Operational Support and Services of the World WIPO after six years as Ambassador Health Organization, where he began his career at the Permanent Mission of in 1979, after having started his professional life Barbados to the United Nations as a management consultant at Arthur Office and Other International Andersen & Co, U.K. Organizations in Geneva. This fol- As part of the major reorganization carried out Having assisted a number of IP offices in their under WIPO’s Strategic Realignment Program, all transition from paper-based to IT-assisted sys- programs related to the administration and man- tems in his former capacity as Director of the agement of the Organization have been brought WIPO Permanent Committees on IP Information, together within the Sector headed by Mr. Takagi has a clear vision of the road ahead. Mr. Sundaram. This includes Finance, Budget and “Recent technological developments for inter- Program Management; Human Resources connecting systems, such as intelligent search Management and Development; Administrative engines, multi-linguistic and analytic tools and Support Services; Information and Communi- common platforms for sharing IP knowledge, cation Technology; Conference and Language will,” he notes, “facilitate the creation of a global IP Services; Security; and Buildings. infrastructure that will support deeper and open collaboration among IP offices.” Mr. Sundaram highlights the central role his Sector will play in establishing a corporate culture Mr. Naresh Prasad, focused on performance and customer service, Chief of Staff Photo: WIPO Photo: and ensuring that core administrative and management processes are efficient, responsive, serv- The Senior Management Team in- ice-oriented and cost-effective. cludes the Executive Director of the Office of the Director General Mr. Yoshiyuki Takagi, (Chief of Staff), Mr. Naresh Prasad Assistant Director (India), who was appointed on General, May 11, 2009. Mr. Prasad led a dis-

Global IP WIPO/Migliore Photo: tinguished career in India’s pre- Infrastructure mier civil service, the Indian Administrative Service, with some 30 years’ expe- Since entering WIPO in rience in assignments at the national and interna- 1994, Mr. Takagi (Japan) tional levels. These included over 10 years in sen- has been Director of sev- ior positions in the Indian Ministry of Commerce eral divisions, most re- and Industry, the last four as India’s focal point for cently having set up and IP issues. Mr. Prasad also served for three years in directed the new department for Global IP the United Nations Industrial Development Infrastructure. He began his career in the Japan Organization (UNIDO). He was India’s chief nego- Patent Office in 1979, and also served in the tiator for IP matters in several bilateral and multi- Ministry of Foreign Affairs of Japan, participating lateral fora. in numerous WIPO meetings and the negotiations of the Agreement on Trade-Related Aspects The Office of the Director General is responsible of Intellectual Property Rights (TRIPS Agreement). for overall strategic planning, and for ensuring efficient coordination in support of WIPO’s goals, Mr. Takagi leads the Global IP Infrastructure both across internal sectors, and between the Sector, which has been established to achieve Secretariat and its Member States and other ex- WIPO’s new strategic goal of “coordination and ternal stakeholders. “My endeavor,” Mr. Prasad ex- development of global IP infrastructure.” The work plains, “is to ensure that the priorities and goals, as of the Sector brings together certain key services set out by the Director General, are met both in and strategic assets provided by WIPO, and coor- letter and spirit." dinates and develops new components, with the aim of facilitating knowledge-sharing and under- pinning sustainable knowledge infrastructures to support the protection and use of IP assets and information by all countries. The programs covered by the Sector include the international classification systems, WIPO IP standards, international IP information services and the moderniza- tion of infrastructure at IP offices. NEW PRODUCTS

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WIPO Publication No. 121(E) ISSN 1020-7074 (print) ISSN 1564-7854 (online)