The European system for granting patents has been a great success. A European patent, applied for via the European Patent Office (EPO), leads to a bundle of national patents that are identical in form but enforceable in each jurisdiction separately. However, while the process for granting patents has been successful, the need for separate enforcement has led to inconsistencies and expensive disputes in Europe. The EU is working to change this but is not there yet. One peculiar feature of the current system is that the validity of a patent can be challenged simultaneously before the EPO and each national court, inevitably leading to the risk of conflicting decisions. To complicate matters further, a decision by the EPO to invalidate a patent will bind all national courts, but the same is not true in reverse. A decision by a national court is not binding on the EPO or other national courts. This article discusses the unsatisfactory state of affairs, and the steps taken by the EPO and national courts to deal with it.
Dealing with delay
Delays of up to six years in opposition proceedings before the EPO have encouraged parallel litigation in national courts, which can sometimes determine the validity of a national part of a European patent in as little as half the time. This has led to the proliferation of proceedings of this kind, increasing the risk of inconsistent decisions. The question faced by national courts is whether to stay their own proceedings and wait for an EPO decision before ruling on issues of validity and infringement. The UK Patents Court in particular has repeatedly refused to stay proceedings concerning the validity of a UK part of a European patent, if it is able to rule on validity before the EPO. However, difficulties arise where a UK court upholds a European patent that is later found to be invalid or is substantially amended by the EPO. In these circumstances, national proceedings might have been a waste of time and money.
The untidy interaction between national courts and the EPO has provoked frustration and criticism from both patentees and some national courts. In response to this, the EPO is becoming more flexible in prioritising cases that are the subject of substantiated requests for acceleration from parties or national courts. In the recent Eli Lilly & Company v Human Genome Sciences Inc 2009, the EPO offered to hear an appeal within five months of receiving an acceleration request from the UK Court of Appeal. The court therefore postponed the date of the UK appeal hearing. Does this decision mark a turning of the tide in European patent cases that will result in UK proceedings being stayed more frequently?
European patent system
Innovators can apply for patents in Europe through national patent offices or centrally, via the EPO. The EPO was established by the European Patent Convention (EPC), an international treaty intended to harmonise the patent laws of contracting states across Europe. In the UK, the EPO was given effect by the Patents Act 1977. The EPC allows for a single patent application for protection in multiple designated states. If granted, the resulting European patent is treated as a national patent in the states applied for, and national courts determine infringement and validity. If the patent is revoked by a national court, it is revoked in that territory only and there is no automatic revocation in other designated states. It is possible, for example, for the same patent to be invalidated in Belgium while being upheld in France. At the same time, European patents are open to attack at the EPO through EPO opposition proceedings. Unlike national courts, however, the EPO has no power to deal with questions of infringement. If held invalid by the EPO, a European patent is invalidated across the board in all designated states, avoiding the expense of bringing separate revocation proceedings in different European jurisdictions.
Initial hopes that the EPO would provide a speedy and cost-effective system have proven false. Opposition proceedings frequently take two to three years and this period is doubled if a decision is appealed. National courts often proceed at a significantly swifter pace. In the UK, for example, first instance decisions often take 12-18 months and appeals are even quicker. The fact that national courts have concurrent jurisdiction with the EPO on validity issues has some other major drawbacks. Each institution has its own procedure, costs and outcome. To add another layer of complexity, it is possible for the EPO to trump national courts and vice versa. The EPO can invalidate a European patent that has been held valid by an English court and an English court can revoke a UK part of a European patent that has been upheld by the EPO. The risk for litigants is a muddle of duplicate proceedings, inconsistent decisions and unnecessary costs.
Need for speed
The slow speed of EPO oppositions is particularly troubling for the proprietors of patents with relatively short life spans, such as those in hi-tech industries. The latest electronic products are frequently overtaken by more sophisticated alternatives within a year or two of appearing on the market and the value of any corresponding patent rights may be equally short-lived. Delays at the EPO are also of concern for the pharmaceutical industry. The costs of launching a new pharmaceutical product may be hundreds of millions of pounds. There will be significant research and development costs for the product itself, together with the expense of lengthy clinical trials and applications for regulatory approval. Businesses cannot afford to take such high financial risks in relation to new products that may be covered by third party patent rights.
The ability to clear the path of third party rights or take swift enforcement action in the early life of a patent may be critical in fast-moving and competitive industries. Delays of four to six years while the EPO decides whether a patent is valid are not commercially viable. For many companies, a swift decision by a national court may be preferable to achieve some degree of certainty in a key market. A slower but more cost-effective central attack at the EPO can be simultaneously pursued in the hope of achieving a pan-European decision at a later date.
The option for an interested party to request accelerated EPO opposition proceedings has been available since the late 1990s. If the EPO agrees to accelerate its proceedings, it will take steps to speed up its own responses and will expect the parties to make full submissions, and take all other procedural steps, within prescribed time limits. Such deadlines will only be extended in exceptional circumstances. The courts and patent offices of contracting states may also request acceleration, and UK courts have done so on several occasions.
In Eli Lilly, Jacob LJ contacted the EPO to request that the EPO speed up a hearing before its Board of Appeal. Parallel appeal proceedings were taking place in the UK Court of Appeal and Jacob LJ was concerned that the UK appeal would be a waste of time if the EPO subsequently upheld the patent. The EPO responded by offering a hearing date less than five months later. This prompted Jacob LJ to move the UK appeal to a later date in case the EPO’s decision made such proceedings unnecessary. Jacob LJ emphasised that parties litigating before the EPO and UK courts should notify both institutions as soon as possible and, where possible, ask the appropriate tribunal to speed things up so as to avoid duplication of proceedings. The swiftness with which the EPO responded to Jacob LJ’s request is encouraging for litigants but is by no means typical. Reported decisions indicate that it may take up to three years to achieve a final decision before the EPO, even after a request for acceleration. Five months is unusually swift and a wait of 15-24 months is more typical.
Eli Lilly demonstrates that, in appropriate circumstances, the EPO is willing and able to dramatically increase the speed of its opposition proceedings. However, expedition of all deserving EPO cases is unlikely to be available any time soon. The EPO’s heavy caseload means that acceleration of some cases will inevitably lead to delays in others. In the meantime, applications for stays of pending national proceedings potentially affected by EPO outcomes are likely to continue.
To stay or not to stay? Glaxo Group Ltd v Genentech Inc & anor 
The jurisdiction of UK courts to stay patent cases pending the determination of the EPO was considered in Genentech and has since been followed in decisions such as GlaxoSmithKline Biologicals SA v Novartis AG . Genentech’s patent claimed the use of an antibody for the treatment of rheumatoid arthritis. GlaxoSmithKline (GSK) brought EPO opposition proceedings against Genentech’s patent in August 2006 and applied to revoke the patent’s UK designation in February 2007. GSK made no infringement claim and the UK trial was set for February 2008. Although Genentech agreed that a final outcome at the EPO was unlikely before the end of 2010, it applied to stay the UK proceedings to avoid duplicating costs and risking inconsistent decisions. For GSK it was important to push on with the UK trial to achieve commercial certainty as soon as possible. Lewison J rejected Genentech’s stay application at first instance, finding that GSK would suffer actual prejudice if there was a delay in determining the validity of the patent. This decision was upheld on appeal. In particular, the Court of Appeal said that although it would not be possible to attain certainty everywhere until the EPO proceedings were finally resolved:
‘Some certainty, sooner rather than later, and somewhere, such as in the UK, rather than nowhere, is, in general, preferable to continuing uncertainty everywhere.’
The Court of Appeal reviewed the general principles applicable to stays in patent cases where there are parallel EPO opposition proceedings. The length of time it is likely to take to achieve some certainty as to the validity of the patent will usually be the most weighty consideration in such cases. If the UK Patents Court is likely to achieve certainty significantly sooner than the EPO, it will normally be a proper exercise of its discretion to decline a stay of proceedings. The Court of Appeal emphasised that a commercial party is the best judge of its own interests. If it has reasons for requiring a swift decision on the validity of a patent, these should be taken seriously. Contrary assertions by a competitor that there is no commercial justification for pressing on with a UK trial should be viewed with suspicion. Courts will consider, amongst other things, the avoidance of unnecessary duplicate proceedings, the need for commercial certainty and the parties’ conduct. Other factors, such as the cost of duplicate proceedings, while relevant, are less important than achieving early commercial certainty somewhere. Judges will be wary of parties over-emphasising these factors.
Tactics in stay cases
For parties faced with making, or resisting, stay applications, timing will be critical. UK courts may stay their proceedings where the EPO is expected to rule within a reasonably short period (or before the UK court). They are less likely to stay their own proceedings if the EPO opposition is moving slowly.
Following Eli Lilly, timing is not simply a question of working out whether a UK Court or the EPO will be the first to determine validity. Now litigants must notify both institutions where there are parallel proceedings. They will also be under pressure to ask the more appropriate institution to speed up its proceedings. This is bad news for litigants hoping to delay proceedings for tactical reasons. The owner of a weak patent, for instance, may feel that the longer its patent remains unrevoked anywhere, the stronger its hand in any settlement discussions. Tactical delays will be difficult to achieve, given the determination of the UK courts to accelerate national or EPO proceedings. Several other arguments may be worth raising in the context of an application for a stay of UK proceedings.
Arguments for a stay
A party seeking a stay should consider making the following arguments.
EPO proceedings will conclude substantially earlier than, or not much later than, a UK trial. This is the most cogent argument in favour of a stay. A party preferring an EPO decision should make a request for accelerated proceedings, preferably one supported by a UK court.
Even if a UK patent designation is revoked, the patent will remain in force in other European countries. A UK trial cannot achieve certainty by itself. The weight of this argument will depend on the importance of the UK market to the parties. This argument is unlikely to succeed if the patentee wants early certainty, even if in only one jurisdiction.
Risk of inconsistent decisions
The EPO may subsequently revoke a European Patent that is upheld in the UK. Alternatively, if the EPO amends a patent claim, a prior national decision might end up relating to the wrong claims. In Genentech, Lewison J noted that a stay will not necessarily avoid duplicate proceedings. If the EPO ultimately upholds a European patent, it may still be attacked at a national level. A UK judgment may also be useful for the EPO.
Where an EPO opposition succeeds, a UK action will have generated unnecessary costs. Parallel proceedings will also be a waste of UK court resources, to the detriment of other litigants. A stay may allow substantial costs savings where UK proceedings are at an early stage and preparations for the EPO are more advanced. Patent litigation in the UK is often substantially more expensive than EPO opposition proceedings. Conversely, costs will be minimised if the parties’ legal teams are the same in both forums. Courts will consider the estimated costs of the UK action in proportion to the commercial value of the dispute and the ability of the parties to foot the bill. In Genentech, legal costs were dwarfed by the cost of developing GSK’s new therapy and the potential market for that product. As major pharmaceutical companies, both parties were also in a position to fund the litigation.
A patentee can put forward very late amendments at the EPO but not during a UK trial. Where a national trial predates an EPO hearing, this could deny the patentee the opportunity to use the greater flexibility in amending claims at the EPO. This argument of procedural fairness was afforded very little weight in Genentech. It is a less significant factor in the absence of infringement proceedings in the UK.
A patentee requesting a stay of UK proceedings should consider giving undertakings not to apply for an injunction and to limit the financial remedies it will seek for infringing products to damages assessed on a reasonable royalty basis, as inGlaxoSmithKline Biologicals SA v Sanofi Pasteur SA . This is a powerful argument in favour of a stay. It is effectively the grant of a royalty-free licence, allowing a potential infringer to continue marketing its product even if the EPO ultimately upholds the patent and it is found to be infringed. Crucially, Genentech sought to preserve its right to seek an injunction against GSK’s new product after the stay was lifted. It is perhaps not surprising that their undertakings had no effect.
Arguments against a stay
A party seeking to resist a stay should consider making the following arguments.
If national proceedings are likely to achieve commercial certainty on the issue of validity earlier than the EPO, UK proceedings should go ahead. As stated by Jacob LJ in Unilin Beheer BV v Berry Floor NV & ors, and approved approved by the UK Court of Appeal in Genentech, a critical consideration is that ‘business needs to know where it stands’. A party with a pressing need for an early decision on validity should consider asking both a UK Court and the EPO to speed up. Such a party may be prepared to agree to a stay in the UK if the EPO is able to decide the matter in a short amount of time.
Effect of a stay
UK courts will be reluctant to delay proceedings where doing so will leave one party facing significant financial decisions without being able to assess the legal risks relating to a relevant patent. The effects of a stay on pipeline products (as in Genentech) or a patent with a short economic life may weigh heavily in the balance. Conversely, if a party cannot establish any commercial prejudice likely to result from a stay, UK courts might be more willing to suspend their proceedings in anticipation of a ruling by the EPO.
Knock-on effect of a UK decision
A reasoned judgement from a specialist UK patent judge may be persuasive elsewhere and could encourage parties to enter into settlement discussions. The benefits of an early UK decision were recognised by the UK Court of Appeal in Genentech.
European patent law is in an unsatisfactory state. Pleas by judges and practitioners to improve matters by introducing an EU-wide patent are being considered by relevant authorities but there has been slow progress. The current system is likely to be in place for some time yet and the willingness of the EPO and UK courts to resolve commercially important patent disputes as quickly as possible is to be welcomed.