Mock UPC hearing reveals delays, protective measures and forum shopping as issues for businesses to consider

Out-Law Analysis | 29 Feb 2016 | 9:41 am | 6 min. read

FOCUS: The simulation of a patent hearing under the new Unified Patent Court (UPC) system has highlighted some of the issues businesses that choose to use it will need to consider in relation to delays, protective measures and where to litigate.

A mock hearing hosted by Pinsent Masons, the law firm behind Out-Law.com, demonstrated how quickly patent holders will need to act when bringing applications for interim injunctions before the new UPC as well as what alleged infringers can do to pre-empt such applications and give themselves a better chance of avoiding a harmful ban on the sale of their products.

The exercise also revealed that important legal principles, which will guide the Court's approach to dealing with disputes before it, could be shaped by judges and influenced by existing approaches and procedures followed by national courts. This could have an influence on where businesses choose to litigate within Europe.

The mock hearing

The mock hearing, hosted in Pinsent Masons' London offices in front of an audience of industry and intellectual property experts, replicated a real life market scenario to test how cases might be conducted under the new UPC. The UPC is expected to be operational in 2017 and will handle disputes over the validity and infringement of new unitary patents as well as European patents that have not been opted out of the new Court's jurisdiction.

The case concerned two fictional digital health businesses, BioTechCity and GreatGadget. In the scenario, BioTechCity enjoyed a leading position in the market courtesy of its D-Light product, a vitamin D monitoring smartwatch. It applied to the UPC for an interim injunction that would ban GreatGadget from bringing its cheaper rival VitD-Mon product to the market. BioTechCity claimed GreatGadget's product would infringe its patent rights.

Prominent figures in the legal community made up the judging panel for the mock UPC hearing and heard competing arguments from James Abrahams QC, Tom Hinchliffe QC and experts from Pinsent Masons on behalf of both BioTechCity and GreatGadget. Mr Justice Richard Arnold, the judge in charge of the Patents Court in England and Wales, retired French Supreme Court judge Alice Pezard and professor Gillian Davies, former Board of Appeal judge at the European Patent Office, had to decide if an interim injunction against GreatGadget was justified.

The decision of the judges was split on a two to one basis in favour of granting the interim injunction to BioTechCity. However, as a condition of the interim injunction being granted, BioTechCity was ordered to provide security in the form of a bank guarantee to GreatGadget. Security was ordered to recognise the potential that BioTechCity's patent might later be found to be invalid or not infringed and the harm to GreatGadget of a sales ban being imposed in the intervening period.

A survey conducted on the night of the views of audience members found that 63% of people were in favour of the decision to issue an interim injunction.

Delay in bringing applications for interim injunctions

One of the issues that was considered in the mock hearing was whether BioTechCity had unreasonably delayed in bringing forward its application for an interim injunction.

In the scenario built for the exercise BioTechCity had filed its application for an interim injunction before the UPC in January 2016, approximately four months after it had first become aware of rumours that GreatGadget was developing the VitD-Mon for the European market. Upon hearing those rumours BioTechCity had, in September 2015, written a letter to its rival warning it against infringement of its patent rights. However, GreatGadget did not respond to BioTechCity.

In the case the UPC also heard how BioTechCity had attended a trade fair in Paris in October 2015 where the VitD-Mon product was being showcased by GreatGadget. At that time the company also uncovered that GreatGadget was taking advance orders for its new product, to be fulfilled in March 2016.

One of the factors the UPC will have to consider when deciding whether applications for interim injunctions are justified is whether there has been an unreasonable delay in bringing such an application.

Looking at how the three judges addressed the issue of delay in the mock trial, the UPC is likely to consider the urgency of a patent holder's action to be of lower importance than it is currently considered to be when applications for interim injunctions are brought before the national courts in Germany. German courts are often very strict in striking out applications if patent holders delay even just a few weeks from learning of alleged infringing activity before applying for an interim injunction.

German courts are already considered to be friendly towards patent holders seeking an interim injunction, but the UPC's approach to looking at delays suggests it will be even more sympathetic to patent holders.

Protective letters

The mock hearing also demonstrated the benefit that businesses could derive from issuing protective letters to the UPC. Protective letters are commonly used in patent disputes in Germany when companies fear they might be subject to a claim of infringement in the near future. Businesses use protective letters to notify courts of why they do not believe an interim injunction should be issued against them for patent infringement before patent holders make an application forthis relief.

The pre-emptive approach allows businesses to outline reasons why, for example, they do not believe patent rights likely to be asserted against them are valid or apply in the context of their rival product. The German system of protective letters is to be adopted by the UPC.

In the mock trial, GreatGadget issued a protective letter to the UPC to put the Court on notice of its opposition to any interim injunction being obtained against it by BioTechCity. GreatGadget filed the letter in secret after receiving BioTechCity's warning letter.

Filing the letter ensured GreatGadget had its voice heard in opposition to BioTechCity's later interim injunction application. It avoided a possible circumstance where an important issue for its business – its right to launch a new product – could be determined by the UPC on the basis of evidence provided by BioTechCity only, as it is within the UPC's powers to do.

Forum shopping

Where businesses choose to litigate within the new UPC framework will be important. This was highlighted during the mock hearing because it demonstrated how judges from different jurisdictions might approach issues relevant to a case differently.

In the test case BioTechCity convinced both Mr Justice Richard Arnold and professor Gillian Davies to grant its application for an interim injunction against GreatGadget. However, the third judge, Alice Pezard, was not persuaded.

Pezard said there was not enough evidence that GreatGadget's VitD-Mon product would infringe BioTechCity's patent rights. However, she also reflected on the fact that the validity of BioTechCity's patent was being challenged by GreatGadget and other companies in opposition proceedings before the European Patent Office.

Looking at the issue of validity from the approach taken by French courts, which she said are particularly attentive to issues concerning prior art and therefore the originality and patentability of inventions, Pezard said the validity of BioTechCity's patent had to be doubted. She explained that questions over validity have to be taken into account by the UPC.

In contrast, however, in his leading judgment, Mr Justice Arnold explained that when a case for an interim injunction is presented before the UPC, the UPC is to presume the underlying patent rights being asserted are valid unless this is shown not to be the case. The judge said BioTechCity also had the better argument on infringement.

The different approaches taken by the mock hearing judges on what weight to give to issues concerning the validity and infringement of BioTechCity's patent, when considering its interim injunction application, is just one example of the potential for different approaches taken by judges from different countries to shape how UPC cases are resolved.

Although judges will have to act in accordance with the UPC Agreement and Rules of Procedure, there are areas of discretion for judges and therefore the potential for their own inclinations, shaped by practices common in their own jurisdiction, to impact on how major issues relevant to UPC cases are handled.

We can expect more harmonised case law to emerge as cases reach the UPC's Court of Appeal but, at least within the initial months of the UPC being in operation, businesses will want to think very carefully about the potential for local judges to shape cases and possibly which countries participating in the UPC framework are best for litigating in.

This potential for local variances could help businesses decide on their patent strategies by weighing up the risk of being exposed to litigation in some countries the UPC operates in against the benefits to be gained from new unitary patent protection or from embracing the UPC as the forum for resolving disputes over European patents.

We expect patent strategies to differ across various sectors, with technology and telecoms businesses more likely to favour making use of unitary patents than pharmaceutical giants, for example.

Deborah Bould; Marc L Holtorf; Emmanuel Gougé are patent law experts at Pinsent Masons, the law firm behind Out-Law.com