Despite Brexit uncertainty with the launch of Europe’s central patent court, Dominic Carman finds plenty for IP litigators to get their teeth into
Case volumes in intellectual property (IP) remain, to borrow a phrase, strong and stable. ‘We’ve not seen much variation in terms of the number of cases in front of the UK Patents Court,’ says Gareth Morgan, IP partner at CMS UK. ‘We monitor claim forms on a monthly basis: typically, there are between 100 and 125 cases issued every year in the Patents Court, of which somewhere between ten and 20 go to trial.’
Morgan outlines why high settlement rates predominate. ‘This is understandable given the cost pressures and the way that UK litigation is part of wider litigation projects geared towards achieving global settlements. The rates of settlement, therefore, don’t surprise me. Lots of these cases are brought by pragmatic business people who want settlements: they want certainty and are using (often multi-jurisdictional) patent litigation to do that. It is rare that you get a point of principle case where one party says they want to stop the other from operating by enforcing their patents, or where one party is sufficiently keen to clarify a point of law that they will go to trial.’
Nevertheless, some cases do make it to trial involving such points of principle, or where large sums are at stake. Last October, the Court of Appeal issued a closely-watched judgment that met both criteria: a licence dispute between Unwired Planet, a US-based mobile technology company, against Huawei, the Chinese telecoms giant. Unwired Planet was suing Huawei for infringement of multiple UK patents that it had acquired from Ericsson. The Court of Appeal held that the imposition of a global licence is not contrary to fair, reasonable and non-discriminatory (FRAND) terms.
‘This is a very important judgment,’ comments Gordon Harris, Gowling WLG’s co-head of IP. ‘It’s the first time any court, anywhere in the world, has attempted to do both sides of the equation: the technical trial to establish that there’s a possibility of a patent infringement case and then the FRAND aspects which were upheld by the Court of Appeal. That decision is already being looked at by courts around the world as a benchmark, a basis on which they can operate.’
‘In an increasingly competitive environment, the quality of London’s specialist judiciary remains a strong draw for international disputes.’
Mark Shillito, global head of IP at Herbert Smith Freehills, gives his take: ‘The judgment is going to affect people’s choice of jurisdiction and make the UK an attractive place to come for decisions on matters of that nature, because the court took an expansive nature of its jurisdiction. The most important point is that the court was willing to order a global licence on FRAND terms, despite the UK only comprising about 5% of the global market. But this didn’t give them any qualms: not every country would do that.’
Richard Vary, IP partner at Bird & Bird, develops the point. ‘Instead of suing in many countries to try and resolve the disputes, you can have a single action in a single country,’ he says. ‘Pragmatically, it’s the best solution because it means a single court can make a decision about what a FRAND rate is. Nobody is obliged to accept it but if the implementer doesn’t accept it he knows that the risk is that he may be injuncted if he is infringing a UK patent.’
Shillito views the judgment as ‘an example of our courts’ commerciality and pragmatism, which is particularly to the fore at the moment, because they are very keen to remain competitive and to attract business to UK law PLC, particularly with all the competitors there are around the world and with Brexit going on.’
For a patentee, the Dutch and German courts remain as ‘key battlegrounds if you want to take the first strike,’ according to Morgan. ‘Due to its split jurisdiction court system, where validity and infringement are heard separately at first instance, Germany still has the “injunction gap” where a fast-moving infringement case can give a patentee an interim (or final) injunction before the validity court has heard the challenge to the patent. Therefore, patentees have significant tactical advantages in the German courts: it is also the largest economic market within the EU.’
Of approximately 700 patent cases a year in Germany, many go to trial. ‘There are some anomalies in the data, which don’t give a true picture of the workload,’ he notes. ‘Individual patents are given separate case numbers whereas multiple patents are often bundled into one UK case, the parallel case in Germany would be counted as multiple cases. More cases go to trial in Germany partly because of the lower costs associated with litigating to trial and because many of these cases are domestic disputes without an international element where settlement might be of lower importance.’
Speed and cost are relevant factors when making comparisons with the UK: Unwired Planet v Huawei took years to conclude and involved millions of pounds in fees. ‘For the courts to be a viable option for most patentees and potential licensees, there needs to be a quicker and cheaper way to resolve disputes of this nature,’ says Vary.
Unwired Planet was a landmark case, he adds, ‘but it took more than four years to determine how much the rate is for a five-year licence: that’s clearly wrong. The county court knocks this stuff out every day when it does rental valuations on business premises. The same is true for the Copyright Tribunal. If we can do that for business tenants, there’s no reason why we can’t be doing this much more quickly and cheaply in the High Court for patent licences.’
Is there room for litigation funders to ease the burden? ‘Patent litigation tends to be challenging for them,’ says Morgan. ‘Particularly where non-monetary relief is sought, funders find it tricky to calculate what is a win. They usually consider investment opportunities on the basis of litigation costs vs likely damages producing an acceptable multiple. Therefore, considering a UK-based patent action, even if you do have a monetary claim, the market (and therefore possible damages award) is generally too small to justify litigation funding. So you run into problems with third party litigation funders – particularly UK-based litigation – because of the high cost to low-damages ratio.’
Nevertheless, in an increasingly competitive environment, the quality of London’s specialist judiciary remains a strong draw for international disputes. Lord Kitchin, who handed down the Unwired Planet appeal judgment, was elevated immediately afterwards filling a specialist gap in the Supreme Court line up.
‘There’s a drive for companies to look at more innovative ways to avoid the typical trench warfare that multi-jurisdictional patent litigation involves.’
Gareth Morgan, CMS UK
But debate exists over the High Court. Morgan argues that the UK is ‘very well-placed to position itself as a global leader in patent litigation given the depth of analysis and flexibility of available remedies that the court system allows. Our patent judges are the some of the best in the world, with perhaps the caveat that we only have a couple of specialists at any one time.’
Harris adds: ‘When you’re in front of judges such as Carr, Arnold, or Birss, you feel as if you’re in safe hands. But specialty patent judges are limited in number. There’s a bit of a crisis on the IP bench at the moment.’
So what about multinational patent disputes? Morgan notes: ‘There’s a drive for companies to look at more innovative ways to avoid the typical trench warfare that multi-jurisdictional patent litigation involves, such as global FRAND dispute and Arrow declarations in the UK and/or multi-jurisdictional relief at interim stage in the Netherlands. Although there are a number of cases we’re involved in where one of the parties actively wants to stifle and exhaust the other into a settlement arrangement, parties are becoming more sophisticated, looking for ways to centralise disputes and avoid the risk of inconsistent rulings from different courts.’
The Unified Patent Court (UPC) is planned as a common court for contracting EU member states, becoming part of their judicial system. It will comprise a Court of First Instance, a Court of Appeal in Luxembourg, an Arbitration and Mediation Centre and a common Registry. Whether the UK can participate in the UPC regime after Brexit is still unknown. In addition, a legal challenge to ratification in the German Constitutional Court is adversely impacting the timetable for introduction of the UPC regime.
‘If the UPC goes ahead and the UK is not part of it, then on one view because IP rights are national and people will still want to deal with infringement validity questions in the UK, they would have to bring UK proceedings alongside UPC proceedings – that might lead to more litigation,’ notes Shillito. ‘On the other hand, it’s hard to see that it would be very attractive to clients to have a UPC system which does not involve the UK, which along with Germany, is the major patent jurisdiction across the EU member states covered.’
Not all matters are so stable.